IR Newsletter
Key messages and Q&A on Rovio’s performance in Q1 2023
Rovio published its Interim Report January–March 2023 on April 28, 2023. This is a summary of the key messages and Q&A regarding the first quarter of 2023.
- Games’ comparable gross bookings increased by 0.9% compared to Q4’22, broadly in line with the US market growth of 1.6%
- Angry Birds Dream Blast continued its strong growth and reached a new record level, growing by 67.7% compared to Q1’22 and by 15.3% compared to Q4’22
- User acquisition investments amounted to 32.3% of games’ revenue (37.8% in Q1’22)
- New games took leaps forward: Moomin: Puzzle & Design showed promising retention test results in Japan, and Bad Piggies 2 is starting its soft launch
- Outlook unchanged: We expect our comparable revenue and adjusted operating profit to be at last year’s level
- On April 17, Sega announced a recommended cash offer of EUR 9.25 per share to the shareholders and EUR 1.48 per option to the option holders of Rovio
What was the highlight of the quarter?
The highlight of the quarter was again the growth of Angry Birds Dream Blast. We now have two games, namely Angry Birds 2 and Angry Birds Dream Blast, that have an annual run rate of about EUR 100 million, which adds stability to our business.
Why did your revenue decline compared to Q1’22?
The decline in our comparable revenue was largely due to the launch peak and scale-up of Angry Birds Journey in early 2022 affecting the comparison figures.
How do you see the mobile gaming market developing in the near future?
After several quarters of decline, the market has shown signs of stabilization. However, it’s really hard to say what will happen in the industry in the near future, as the market conditions are very uncertain. We do not yet see many major underlying growth drivers to improve the overall market in 2023. We expect the advertising market to face high uncertainty due to Apple’s ATT framework and other privacy matters as well as the macroeconomic situation. In the long term, mobile continues to be the largest gaming segment. The industry remains full of opportunities for great games, and that’s what we focus on delivering.
What is your outlook per top live game for Q2 compared to Q1?
- Angry Birds 2: We are working on a turnaround
- Angry Birds Dream Blast: March was the best month ever
- Angry Birds Friends: Quite stable development
- Angry Birds Journey: We are working on a turnaround
Why did the gross bookings of Angry Birds 2 decline?
The performance of Angry Birds 2 was a continuation of the weaker than normal holiday season in December. While the game has a strong and stable fan base of engaged users, we saw a decline in the performance of new users, which made us reduce our user acquisition investments, as we improve the early game experience and user acquisition.
What does the future look like for Angry Birds 2?
We believe that the game has growth potential. The team keeps working towards improving the experience for new users and enabling additional user acquisition investments. We also draw inspiration from the actions that were taken with Angry Birds Dream Blast to find new growth drivers, for instance in terms of user acquisition creatives and networks.
What drove the strong performance of Angry Birds Dream Blast?
Indeed, Angry Birds Dream Blast had another strong quarter, and we saw several consecutive best revenue weeks in the product's lifetime. The team size has grown, with great hires allowing us to progress faster on many fronts simultaneously. We're putting a lot of effort into improving the core game experience, to analyze our players' level journeys better, and optimizing and segmenting the experience for long-term retention and high lifetime revenue. We also have a new creative team working on marketing campaigns. As a result of those efforts, user acquisition was at its highest level since the launch in 2019, and we saw great returns on those investments.
What does the future look like for Angry Birds Dream Blast?
Our live operations are more efficient than ever, and we will be introducing new engaging events for the players in Q2. We believe we can continue further increasing the average revenue per existing daily active user. In user acquisition, we will continue utilizing the opportunities we see in the market, aided by the improved performance of the game overall.
What games do you have in soft launch at the moment?
We currently have three games in soft launch: Moomin: Puzzle & Design and two hybrid-casual games developed by Ruby Games, namely Wizard Hero and Hunter Assassin 2. Bad Piggies 2 is also starting its soft launch soon.
Pre-silent newsletter Q1 2023
Mobile gaming market
During January–February, the global market (excl. China) and the US market declined by 1% and by 9%, respectively, compared to the corresponding period in the previous year, according to data.ai.
Sequentially, market development has been more flat. Compared to November–December, the global market grew by 2%, while the US market declined by 2%, according to data.ai. It is good to note that the number of days in January–February is two days (3%) lower than in November–December.
Rovio’s performance
Outlook per top live game for Q1’23 compared to Q4’22:
- Angry Birds 2: softer due to seasonality and weaker cohorts of new users; the solid performance of older cohorts is expected to continue, but new cohorts have been weaker, so we are optimizing both user acquisition and the game for new players
- Angry Birds Dream Blast: strong, as we have a good momentum in the game’s performance, which allows us to invest more in user acquisition
- Angry Birds Friends: stable
- Angry Birds Journey: stable, the team working on a turnaround
- Ruby Games: So far there have been no new hyper-casual game launches by Ruby Games in Q1. The hypercasual space is volatile by nature, and currently working against a headwind.
As part of our plan to double down on live operations and the games that we see potential for, we have continued to increase the sizes of our game teams, which has resulted in a higher headcount compared to the end of 2022.
2023 outlook (as in the financial statement bulletin 2022)
We expect our comparable revenue and adjusted operating profit to be at last year’s level.
User acquisition investments in Q1 2023 are expected to be 29–34% of games’ revenues.
Consensus
The most recent consensus data can be found here.
Annual report 2022
Rovio’s Annual Report 2022, including the Sustainability Report, Remuneration Report and Corporate Governance Statement, has been published.
Annual General Meeting 2023
The Annual General Meeting of Rovio Entertainment Corporation will be held on Monday, April 3, 2023 at 1:00 p.m. (Finnish time) at Hanaholmen, Hanasaarenranta 5, FI-02100 Espoo. Further information can be found here.
Strategic review
On March 22, the Board of Directors of Rovio confirmed that the preliminary discussions with Playtika in connection with Rovio's strategic review have ended. The Board of Directors continues its strategic review, including preliminary non-binding discussions with certain other parties, in order to reach the best possible outcome for Rovio and its shareholders.
There can be no assurance that the strategic review and the preliminary non-binding discussions will result in any cash or other tender offer or any other transaction, or the pricing of any such possible transaction. Rovio will release further information at an appropriate time.
Key messages and Q&A on Rovio’s performance in Q4 2022
Rovio published its Financial Statement Bulletin January–December 2022 on February 9, 2023. This is a summary of the key messages and Q&A regarding the fourth quarter of 2022.
- Games’ comparable gross bookings increased by 5.4% compared to Q3’22 but decreased by 7.9% compared to Q4’21, outperforming our largest market, the US, which declined by 11% (+2% vs. Q3’22 and -11% vs. Q4’21)
- The US market increased in Q4’22 for the first time after five consecutive quarters of decline, growing by 2% sequentially
- Profitability declined, following increased opportunities in user acquisition investments: adjusted operating profit margin 7.7% (16.6% in Q4’21)
- User acquisition investments reached 31.3% of games’ revenue (26.9% in Q4’21)
- Strong growth of Angry Birds Dream Blast continued: gross bookings +33% compared to Q4’21
- Game development progressing: several games in soft launch in 2023
- Outlook: We expect our comparable revenue and adjusted operating profit to be at last year’s level.
What was the highlight of the quarter in these challenging market conditions?
The star of the quarter was Angry Birds Dream Blast, our second biggest game, which grew by 33% compared to Q4’21. This is an important result for us, because we really focused on our live games in 2022, as we thought this would be particularly important in the soft market. Of course we want to apply all of the learnings we have from Angry Birds Dream Blast to our other big titles as well, like Angry Birds 2 and Angry Birds Friends.
Why did your profit figures for Q4 decline so much?
The main items that had a negative impact on our profit in Q4 were:
- Increased user acquisition investments, especially for Angry Birds Dream Blast, given the good returns we saw on our campaigns
- Lower gross profit, driven by lower ad revenue in a soft digital advertising market (privacy/ATT, macroeconomics)
- Higher operating expenses, driven by increased headcount
- One-off settlement and legal fees related to the New Mexico lawsuit
What was driving the increased user acquisition investments?
We were able to increase user acquisition investments, especially for Angry Birds Dream Blast, thanks to improved game performance. The game had an amazing Q4 and grew by 33% in gross bookings in Q4 compared to Q4’21. The growth was driven by seasonal events, new game features and event types, new user acquisition channels and adjustments in ways of working. This shows that our increased focus on our top live games have started to pay off.
You said you are expecting 2023 to be a stable year for the mobile gaming market. What is that assumption based on?
In our view, there were three main factors that contributed to the market decline in 2022. First, the normalization of playing behavior post Covid-19 lockdowns – we believe the market has now returned to the baseline situation where it was pre-Covid-19. Second, Apple’s ATT (App Tracking Transparency) privacy framework – we believe the market has now adapted to the new ways of doing marketing. Thus we do not expect this factor to continue to drive the market down. We might even start to see some positive development with the latest developments by Apple improving the measurability of ad activity and investments. Third, the macroeconomic situation, especially inflationary pressure on consumer and advertiser spending – we see the mobile gaming industry pretty resilient to macroeconomic challenges, especially the casual gaming market that Rovio focuses on. However, we expect the advertising market to face higher uncertainty due to ATT and other privacy matters as well as the macroeconomic situation. Advertisers are expected to be more cautious due to weak consumer confidence.
All of this together and with some positive recent signals, such as sequential market growth in Q4 2022, has led us to expect a stable year for the mobile gaming market. However, we do not yet see many major underlying growth drivers to improve the overall market in 2023.
You said that you are going to be disciplined in your investments. What does it mean in practice?
We will continue to invest in projects showing signs of growth, such as our top live games, while remaining disciplined with our investments in new titles, focusing our efforts on brands and projects that show strong market traction.
What is your outlook per top live game for Q1’23 compared to Q4’22?
- Angry Birds 2: softer due to seasonality and weaker cohorts of new users; the solid performance of older cohorts is expected to continue, but new cohorts have been weaker, so we are optimizing both user acquisition and the game for new players
- Angry Birds Dream Blast: strong, as we have a good momentum in the game’s performance, which allows us to invest more in user acquisition
- Angry Birds Friends: stable
- Angry Birds Journey: stable
- Ruby Games: The hypercasual space is volatile by nature, and currently working against a headwind. Ruby Games has a clear focus to transition to hybrid-casual games, with 3 games in soft launch.
Which games do you have in soft launch at the moment?
We have currently four games in soft launch: Moomin: Puzzle & Design and three hybrid-casual games developed by Ruby Games, namely Wizard Hero and two new Hunter Assassin games – a multiplayer game Hunter Heroes and a single player game Hunter Assassin 2.