Rovio Entertainment Corp.

Half-year 2023 financial report: Soft quarter in a declining market – new games approaching launch window

Rovio Entertainment Corporation, Stock Exchange Release, August 11, 2023 at 9:00 a.m. EEST

April–June 2023 highlights

• Rovio’s group revenue declined by 7.4% to EUR 72.6 million (78.4). On a comparable (*) basis, revenue declined by 6.0%. The decline was mainly driven by Angry Birds 2 and Angry Birds Journey. Rovio had good growth in all regions except for North America, which declined.
• Group EBITDA decreased to EUR 9.9 million (14.3), and the EBITDA margin decreased to 13.6% (18.2).
• Group adjusted EBITDA decreased to EUR 10.7 million (15.0), and the adjusted EBITDA margin declined to 14.8% (19.1).
• Group operating profit decreased to EUR 6.9 million (10.5), and the operating profit margin decreased to 9.5% (13.4).
• Group adjusted operating profit decreased to EUR 7.8 million (11.3), and the adjusted operating profit margin decreased to 10.7% (14.3).
• Games’ gross bookings declined by 5.1% to EUR 68.7 million (72.4). Comparable (*) gross bookings declined by 3.6%.
• The gross bookings of Angry Birds Dream Blast increased by 61.8% to EUR 22.7 million (14.1).
• User acquisition investments increased to EUR 21.4 million (20.9), representing 30.2% of games’ revenue (27.5).
• Operating cash flow decreased to EUR 8.5 million (15.3) due to a lower net profit.
• The new games Moomin: Puzzle & Design and Wizard Hero are approaching their release window.
• Earnings per share declined to EUR 0.09 (0.13). Adjusted earnings per share declined to EUR 0.10 (0.14).

January–June 2023 highlights

• Rovio’s group revenue declined by 9.0% to EUR 148.7 million (163.4). On a comparable (*) basis, revenue declined by 10.6%. The decline was due to the high spike of Angry Birds Journey launch in Q1’22 and lower revenue from Angry Birds 2.
• Group EBITDA decreased to EUR 22.0 million (25.4), and the EBITDA margin decreased to 14.8% (15.5).
• Group adjusted EBITDA decreased to EUR 22.8 million (28.6), and the adjusted EBITDA margin decreased to 15.3% (17.5).
• Group operating profit decreased to EUR 15.7 million (18.0), and the operating profit margin decreased to 10.5% (11.0).
• Group adjusted operating profit decreased to EUR 16.5 million (21.2), and the adjusted operating profit margin decreased to 11.1% (13.0).
• Games’ gross bookings declined by 8.1% to EUR 140.8 million (153.2). Comparable (*) gross bookings declined by 9.8%.
• User acquisition investments decreased to EUR 45.2 million (52.0), representing 31.3% of games’ revenue (32.9).
• Operating cash flow decreased to EUR -0.3 million (29.3) due to changes in working capital in Q1’23 (bonus payments in March and the New Mexico lawsuit settlement payment in January) and a lower net profit in Q2’23.
• Earnings per share declined to EUR 0.19 (0.20). Adjusted earnings per share declined to EUR 0.19 (0.24).
• Events after the review period: On August 10, 2023, the final result of Sega Europe Limited’s recommended cash offer for all the shares and options in Rovio Entertainment Corporation was announced. Based on the final result of the Offer, the 73,397,174 Shares in Rovio validly tendered in the Offer represent approximately 96.3 percent of all issued and outstanding Shares and votes in Rovio. In addition, 100 percent of the Options have been tendered in the Offer. As the Minimum Acceptance Condition and all other conditions to complete the Offer have been fulfilled, the Offeror will complete the Offer in accordance with its terms and conditions.

*) Comparable growth is calculated at constant USD/EUR exchange rates.
**) Source: data.ai

Key figures

	4–6/	4–6/	Change,	1–6/	1–6/	Change,	1–12/
EUR million	2023	2022	%	2023	2022	%	2022
Revenue	72.6	78.4	-7.4%	148.7	163.4	-9.0%	317.7
EBITDA	9.9	14.3	-30.8%	22.0	25.4	-13.5%	43.3
EBITDA margin	13.6%	18.2%		14.8%	15.5%		13.6%
Adjusted EBITDA	10.7	15.0	-28.4%	22.8	28.6	-20.3%	53.9
Adjusted EBITDA margin, %	14.8%	19.1%		15.3%	17.5%		17.0%
Operating profit	6.9	10.5	-34.5%	15.7	18.0	-12.9%	28.6
Operating profit margin, %	9.5%	13.4%		10.5%	11.0%		9.0%
Adjusted operating profit	7.8	11.3	-31.1%	16.5	21.2	-22.2%	39.2
Adjusted operating profit margin, %	10.7%	14.3%		11.1%	13.0%		12.3%
Profit before tax	7.9	12.5	-36.5%	17.1	20.1	-15.0%	30.6
Adjusted profit for the period	7.5	10.3	-26.9%	14.8	17.8	-16.8%	31.4
Capital expenditure	2.2	1.1	100.7%	4.6	3.2	40.4%	7.0
User acquisition	21.4	20.9	2.4%	45.2	52.0	-12.9%	96.5
Return on equity (ROE), %	12.4%	22.5%		12.4%	22.5%		14.4%
Net gearing ratio, %	-65.0%	-82.4%		-65.0%	-82.4%		-72.7%
Equity ratio, %	83.8%	71.0%		83.8%	71.0%		79.3%
Earnings per share, EUR	0.09	0.13	-30.9%	0.19	0.20	-8.9%	0.30
Earnings per share, diluted EUR	0.09	0.13	-30.8%	0.18	0.20	-9.2%	0.30
Adjusted earnings per share, EUR	0.10	0.14	-28.2%	0.19	0.24	-18.5%	0.42
Net cash flows from operating activities	8.5	15.3	-44.3%	-0.3	29.3	-101.0%	49.9
Employees (average for the period)	568	503	12.9%	561	499	12.4%	513

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 denominated in-app-purchases in the United States and for global ad network sales.

Alex Pelletier-Normand, CEO
The second quarter of 2023 was a challenging period in the mobile gaming market, and we could feel the effect in our results as well. Our financial development was also impacted by the lack of releases so far this year. However, we are approaching the launch window of new games, including Moomin: Puzzle & Design and Wizard Hero.

The global mobile gaming market declined in the second quarter by 0.8% compared to the same period in the previous year and by 3.4% sequentially. At the same time, our comparable gross bookings decreased by 3.6% and 3.5%, respectively. The star of recent quarters, Angry Birds Dream Blast, slowed down in its growth, in part due to algorithm changes in certain advertising channels, but remained at a high level and continued to show impressive growth of 61.8% compared to a year ago. Angry Birds 2 had a soft second quarter, but the third quarter started stronger. We continue to advance with our turnaround plan, improving the game in multiple areas and strengthening the team with additional key talents, including a new game lead and a new Head of Studio for Stockholm. We are encouraged to note that our group revenue grew in every region, apart from North America.

Our new game titles continued to make good progress. Moomin: Puzzle & Design remains on track for global launch, targeted to happen later this year. Wizard Hero by Ruby Games is showing promising test results, and we are looking forward to making it available to all players. The second quarter was the best one for Ruby Games since Q2 2022, and we expect this game to help them continue to grow. We also have some fresh exciting news: our studio in Toronto has signed a contract with Apple to develop a new Angry Birds game to Apple Arcade. We expect the game to be a profit driver and improve the visibility of the Angry Birds brand.

On the brand licensing front, we announced that Prime Video and Amazon Kids+ are set to release an animated series called Angry Birds Mystery Island, the first Angry Birds series created with Amazon. Another highlight was the opening of the first ever Angry Birds Café in New York, US in early July. We are delighted to see the Angry Birds brand expand, enabling fans to interact with it in new and fun ways.

This week, we announced the result of the cash tender offer by SEGA to acquire all shares and options of Rovio. Accordingly, the shares validly tendered in the offer represent approximately 96.3% of all issued and outstanding shares and votes in Rovio. In addition, 100% of the options were tendered. This means that the strengths of Rovio and SEGA will soon be combined, which presents an incredibly exciting future for both parties.

As we are heading towards the end of Rovio’s journey as a listed company, I would like to sincerely thank all our shareholders for their support throughout the years. Being listed made Rovio the stronger and more resilient company that it is today and led to the acquisition by SEGA. Now it is time for the company to start a new chapter and bring even more joy to our players, enhancing and expanding Rovio’s and SEGA’s vibrant IPs.

2023 outlook (unchanged)
We expect our comparable revenue and adjusted operating profit to be at last year’s level.

Additional information on user acquisition investments in Q3 2023
User acquisition investments in Q3 2023 are expected to be 25–30% of games’ revenues.

More information
Alex Pelletier-Normand, CEO, tel. [phone] (Investor Relations phone)
René Lindell, CFO, tel. [phone] (Investor Relations phone)

Rovio in brief
Rovio Entertainment Corporation is a global mobile-first games company that creates, develops and publishes mobile games, which have been downloaded over 5 billion times. 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, animations and consumer products in brand 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 eight game studios – one in Espoo (Finland), one in Stockholm (Sweden), one in Copenhagen (Denmark), one in Barcelona (Spain), two in Montreal and one in Toronto (Canada). The studios also include 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 main list of NASDAQ Helsinki stock exchange with the trading code ROVIO.

Attachment

• Rovio Q2-2023_half-year financial report