Good results in a market with headwinds in Q2

Rovio Entertainment Corp.

Rovio Entertainment Corporation Stock Exchange Release August 11, 2022 at 9:00 AM EEST

Rovio Entertainment Corp.: Half-yearly 2022 financial report: Good results in a market with headwinds in Q2

Highlights April-June 2022

• The Rovio group’s turnover increased by 14.0% to EUR 78.4 million (68.8). On a comparable basis, sales (at constant exchange rates and excluding Ruby Games) decreased by -1.1%.

• The group’s adjusted EBITDA grew to EUR 15.0 million (8.7) and the adjusted EBITDA margin increased to 19.1% (12.7).

• The group’s adjusted operating profit amounted to EUR 11.3 million (6.2) and the adjusted operating profit margin increased to 14.3% (8.9).

• Gross game bookings increased by 8.8% to EUR 72.4 million (66.6). Gross comparable bookings (at constant exchange rates and excluding Ruby Games) were down 6.5%.

• Gross bookings for Angry Birds 2, Rovio’s largest game, were EUR 28.4 million, up 6.9% year-over-year

• Angry Birds Friends grew by 10.0% year-over-year with a total gross booking of EUR 9.1 million.

• Rovio’s latest game Angry Birds Journey, which was launched on January 20, 2022, generated 7.3 million euros gross bookings.

• User acquisition investments amounted to EUR 20.9 million (21.3) and 27.5% of games revenue (32.0%).

• The operating cash flow amounted to EUR 15.3 million (7.6).

• Earnings per share amounted to EUR 0.13 (0.07).

Highlights January–June 2022

• The Rovio group’s turnover increased by 20.2% to EUR 163.4 million (135.9). Comparable growth (at constant exchange rates and excluding Ruby Games) was 5.3%.

• The group’s adjusted EBITDA grew to EUR 28.6 million (21.0) and the adjusted EBITDA margin increased to 17.5% (15.5).

• The group’s adjusted operating profit amounted to EUR 21.2 million (16.2) and the adjusted operating profit margin increased to 13.0% (12.0).

• Gross game bookings increased by 17.2% to EUR 153.2 million (130.8). Comparable gross booking growth (at constant exchange rates and excluding Ruby Games) was 1.9%.

• User acquisition investments amounted to EUR 52.0 million (38.5) and 32.9% of games revenue (29.4%).

• The operating cash flow amounted to EUR 29.3 million (10.1).

• Earnings per share amounted to EUR 0.20 (0.17).

Key figures

	4-6/	4-6/	Change,	1–6/	1–6/	Change,	1–12/
million euros	2022	2021	%	2022	2021	%	2021
Revenue	78.4	68.8	14.0%	163.4	135.9	20.2%	286.2
EBITDA	14.3	8.7	63.7%	25.4	20.5	24.1%	50.8
EBITDA margin	18.2%	12.7%		15.5%	15.1%		17.7%
Adjusted EBITDA	15.0	8.7	72.2%	28.6	21.0	36.4%	54.8
Adjusted EBITDA Margin, %	19.1%	12.7%		17.5%	15.5%		19.1%
Operating profit	10.5	6.2	70.7%	18.0	15.7	14.7%	37.7
Operating profit margin, %	13.4%	8.9%		11.0%	11.5%		13.2%
Adjusted Operating Income	11.3	6.2	82.8%	21.2	16.2	30.7%	43.7
Adjusted Operating Profit Margin, %	14.3%	8.9%		13.0%	12.0%		15.3%
Profit before taxes	12.5	6.1	106.4%	20.1	16.5	22.4%	40.3
Capital Expenditure	1.1	0.8	34.2%	3.2	1.8	84.4%	4.0
User Acquisition	20.9	21.3	-1.9%	52.0	38.5	34.8%	77.2
Return on Equity (ROE), %	22.5%	18.5%		22.5%	18.5%		22.2%
Net gear ratio, %	-82.4%	-72.5%		-82.4%	-72.5%		-77.4%
Equity, %	71.0%	84.9%		71.0%	84.9%		70.8%
Earnings per share, EUR	0.13	0.07	94.3%	0.20	0.17	21.5%	0.41
Earnings per share, diluted EUR	0.13	0.07	92.2%	0.20	0.17	20.8%	0.41
Net cash flows from operating activities	15.3	7.6	101.9%	29.3	10.1	191.2%	44.0
Employees (average for the period)	503	481	4.7%	499	484	4.4%	490

Unless otherwise stated, the comparative figures in brackets refer to the corresponding period in the previous year. Calculations and definitions are presented in the Performance Measurements section.

Changes in comparable currencies were calculated by translating the reporting period figures into the average USD/EUR exchange rates of the comparable period for US dollar-dominated in-app purchases in the United States and global ad network sales.

Alex Pelletier-Normand, CEO
I am proud to report that we performed well in the second quarter in a challenging environment. We have clearly outperformed the market and I would like to thank all Rovians for their dedication and commitment during this period. In the second quarter, our reported revenue grew healthy, driven by the release of Angry Birds Journey, the consolidation of Ruby Games and a favorable exchange rate. Our comparable store sales were virtually flat year on year, while our profit grew significantly.

Our biggest game, Angry Birds 2, continued to grow year after year, celebrating its 7th anniversary at the end of July with a special community-driven gaming event. We are really humbled to see how vibrant the game continues to be and how engaged the fans are in participating in such events. Our hyper-casual game studio Ruby Games grew 23% pro forma year-over-year, but was down from the first quarter this year; hyper-casual games, monetized primarily through advertising, were impacted by both the global reduction in ad investment and Apple’s ATT.

Angry Birds Journey revenue in this quarter was lower than the Q1 launch peak. User acquisition investments were phased out in the second quarter after launch. The team is now looking for new growth paths, including the dynamic adjustment of the game’s difficulty to the player’s personal play styles, as well as the inclusion of a deeper metagame to improve engagement.

In our new games pipeline, Moomin: Puzzle & Design has completed a successful market test in Japan and the team is now continuing to add content in preparation for the next phase of the soft launch. Hunter Assassin 2 from Ruby games continues to progress in soft launch with the addition of a real-time multiplayer mode and a deeper meta system.

We are convinced that one of our growth vectors is our Live Games; Angry Birds Friends showed us that there is a lot of potential in those fan favorite titles that are very rich in content and for which a loyal fan base has been built over the years. We plan to increase investment in our best performing live games to enable them to reach their full potential. We are convinced that for those titles, the best is yet to come.

Our brand-building initiatives continued with the release of the second season of Angry Birds Summer Madness on Netflix in June. The series has a new style that is very exciting for our fans and also allows us to expand our audience. The first season reached the top 10 in the kids category on Netflix in 55 territories in its opening week.

Looking at the market, the second quarter of the year was challenging. Based on estimates from market intelligence provider data.ai, US in-app purchase revenue declined 19% year-over-year. This was the fourth straight quarter of decline and we believe it was due to three main factors:

First: the normalization of spending patterns after the lockdown. As more people return to normal, so do their playing patterns.

Second, Apple’s ATT policy limits publishers’ ability to target players efficiently. Marketing campaigns now tend to gain more customers, but the fit between product and player is looser.

And third, macroeconomic factors such as rising inflation have an impact on both consumers and businesses. Players’ willingness to pay is declining and advertisers are cutting their budgets. On the one hand, this had a negative effect on ad revenue, but may offer opportunities for user acquisition. The market swings have also allowed us to bolster our herd with great new talent.

As we enter the third quarter of the year, we see some improvement in momentum and performance in user acquisition. While we expect the market headwinds to continue in the near term, we strongly believe in the growth of the mobile gaming industry. I’m very energized to see all the exciting game updates, new games and branded projects the teams are working on. We are also proud to know that our competitive advantages with the Angry Birds brand and our Beacon growth platform put Rovio in an advantageous position in this market.

Outlook 2022 (unchanged)
Building on the positive momentum in our top live games, the launch of Angry Birds Journey in January, and taking full advantage of the Ruby Games acquisition from the start of the year, we expect strong revenue growth for the year. Depending on the rate of growth and the investment in user acquisition to fuel that growth, especially in the case of new games, and our increased investment in new game development, adjusted operating income is expected to be lower year on year.

Additional Information on User Acquisition Investments in Q3 2022
User acquisition investment for Q3 2022 is expected to be 25-30% of game revenue.

Audiocast and conference call
Rovio will host an English language audiocast and conference call on the 2022 Half Year Financial Results, including a Q&A session, for analysts, media and institutional investors at 2:00 PM – 3:00 PM EEST on August 11, 2022. The audiocast can be viewed live at: https://investors.rovio.com/en, and later in the day as a withdrawal.

Conference call details:
PIN: 19635962#

Finland: +358 981 710 310
Sweden: +46 856 642 651
United Kingdom: +44 3333 000 804
United States: +1 6319 131 422

More information:
Alex Pelletier-Normand, CEO, tel. +358 40 485 8985 (media phone)
René Lindell, CFO, tel. +358 40 485 8985 (media telephone)

Distribution: Nasdaq Helsinki, Main Media, https://investors.rovio.com/en

Rovio in a nutshell
Rovio Entertainment Corporation is a global mobile-first games company that creates, develops and publishes mobile games that have been downloaded more than 5 billion times. Rovio is best known for the global brand Angry Birds, which started in 2009 as a popular mobile game and has since evolved from games to various entertainment, animation and consumer products in branded licensing. Rovio has produced The Angry Birds Movie (2016) and its sequel, The Angry Birds Movie 2, was released in 2019. The company offers multiple mobile games and has seven game studios: two in Espoo (Finland), one in Stockholm (Sweden), Copenhagen (Denmark), Montreal and Toronto (Canada), as well as a subsidiary in Izmir (Turkey) called Ruby Games, which was acquired in 2021. Most of the employees are based in Finland, where Rovio is headquartered. The company’s shares are listed on the master list of the NASDAQ Helsinki exchange with the trading code ROVIO.

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