Comments from CEO, Kati Levoranta
Rovio’s group revenue in the fourth quarter of 2019 was EUR 71.6 (72.7) million which was -1.4% lower year-on-year. Rovio Games revenue and gross bookings reached a new record and were EUR 66.7 million (65.2) and EUR 67.0 million (66.8), respectively. Angry Birds Dream Blast, which was released in January 2019, continued to grow and reached EUR 18.8 million gross bookings. The 2019 full year gross bookings of Angry Birds Dream Blast were EUR 57.6 million and it was Rovio’s fastest growing free-to-play game ever. In an increasingly competitive market this is a great achievement from the team and shows both Rovio’s ability to bring innovative games to a broad audience and the continuing success of the Angry Birds franchise in mobile games.
Group full year revenue was EUR 289.1 million and grew 2.8%. The adjusted operating profit was EUR 18.3 million and the adjusted operating profit margin 6.3% landing within the guidance range 5-8%. The full year revenue was slightly lower than the guidance range EUR 295 - 310 million mainly due to lower Brand Licensing Unit revenues in Q4. The Brand Licensing Unit revenues in Q4 amounted to EUR 4.9 million (7.5) and declined -34.4% year-on-year.
During Q4, the Brand Licensing Unit was restructured and merged with the marketing organization to improve efficiency and profitability. Consumer products licensing will focus on our top licensees, product categories, and territories. In content licensing, Angry Birds Movie 2 is now available on-demand and will be coming to TV distribution starting Q1/2020, and a new long-form Angry Birds animated series slated for release in H2/2021.
The Group adjusted operating profit in the reporting period was EUR 0.2 (5.3) million and the adjusted operating profit margin 0.3% (7.2%). The lower operating margin in this quarter was as expected due to the increased investments in user acquisition.
In September 2019, Rovio released a new game called Sugar Blast, which is a spin-off of Angry Birds Dream Blast with a new IP. While Sugar Blast has not scaled its revenue as fast as the original game, this has been a good learning on how Rovio can be agile and fast in bringing new IP to the market and reaching out to new audiences. During Q4, Sugar Blast reached a yearly gross booking run-rate of nearly EUR 10 million and the team continues to improve the game during 2020.
The user acquisition investments in the reporting period were EUR 27.5 million (23.3) or 41.3% of games revenues. The user acquisition investments were mostly directed to the growth games i.e. Angry Birds Dream Blast and Sugar Blast. During the end of the year we scaled down user acquisition investments significantly as the returns on those investments were not meeting our payback model expectations. Our user acquisition investments in the beginning of 2020 are at much lower level than during Q3 and Q4 last year. We naturally will invest more in user acquisition if we see an opportunity in the market, improvement in live games performance or when we launch a new game.
Our games roadmap continues to be very exciting. At the moment, we have three games with a new IP in soft launch. One of the games in soft launch in 2019, Angry Birds Pop Blast, was discontinued during January as based on the soft launch data we did not see an opportunity to scale the game to a satisfactory level with user acquisition. While it is too early to estimate exact global launch dates for new games, given the current progress we aim to launch 1-3 new games in 2020.
In 2019 we announced that we would explore alternative financial structures and partnerships for Hatch Entertainment Ltd., Rovio’s 80% owned subsidiary developing a cloud-based game streaming service in order to accelerate its growth. We have decided to end the 2019 financing round and we are evaluating strategic alternatives for Hatch.
The competition in game streaming has intensified during 2019 while 5G networks and devices rollout has been slower than expected. Due to the changes in the operating environment Hatch Entertainment decided to focus its strategy. Going forward, Hatch will focus on Hatch Kids, a subscription and streaming based digital entertainment and edutainment service tailored for children and families. Hatch Kids is in soft launch in Finland and Sweden on Android and we have seen positive early performance. Hatch is planning to restructure its operations to align with the updated strategy and this is planned to lead to an annualized cost savings of approximately EUR 6 million.
Read the full report here