Rovio Entertainment Corp.: Q3 2023 interim report: SEGA acquired 97.7% of Rovio – the redemption procedure of the remaining shares started

Rovio Entertainment Corporation Stock Exchange Release October 27, 2023 at 9:00 a.m. EEST

*Rovio Entertainment Corp.: Q3 2023 interim report: SEGA acquired 97.7% of Rovio – the redemption procedure of the remaining shares started*

*July–September 2023 highlights*

· SEGA gained control of 97.7% of Rovio’s issued and outstanding shares and commenced redemption proceedings to obtain ownership of the remaining issued and outstanding shares.
· Rovio’s group revenue declined by 5.6% to EUR 73.1 million (77.4). On a comparable (*) basis, revenue declined by 0.3%. The decline was mainly driven by Angry Birds 2 and Angry Birds Journey.
· There were no new game launches during the quarter. Moomin: Puzzle & Design, Wizard Hero and Hunter Assassin 2 continued in soft launch.
· Group EBITDA decreased to EUR 10.0 million (12.2), and the EBITDA margin decreased to 13.7% (15.7).
· Group adjusted EBITDA increased to EUR 15.8 million (15.7), and the adjusted EBITDA margin increased to 21.7% (20.2).
· Group operating profit decreased to EUR 6.7 million (8.6), and the operating profit margin decreased to 9.1% (11.1).
· Group adjusted operating profit increased to EUR 12.5 million (12.1), and the adjusted operating profit margin increased to 17.1% (15.6). Adjustments in the reporting period amounted to EUR 5.8 million and consisted of advisory costs related to the acquisition by SEGA of EUR 10.4 million, one-time long-term incentive and bonus scheme settlements of EUR 1.9 million and changes in the contingent liability of the Ruby Games acquisition of EUR -6.4 million.
· Games’ gross bookings declined by 4.7% to EUR 67.5 million (70.8). Comparable (*) gross bookings increased by 0.7%.
· User acquisition investments decreased to EUR 21.1 million (21.3), representing 29.6% of games’ revenue (28.7).
· Operating cash flow decreased to EUR -0.9 million (8.6). The negative cash flow was due to costs related to the acquisition by SEGA.
· Earnings per share increased to EUR 0.12 (0.10). Adjusted earnings per share increased to EUR 0.18 (0.14).
*January–September 2023 highlights*

· Rovio’s group revenue declined by 7.9% to EUR 221.8 million (240.8). On a comparable (*) basis, revenue declined by 7.0%. 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 32.0 million (37.6), and the EBITDA margin decreased to 14.4% (15.6).
· Group adjusted EBITDA decreased to EUR 38.7 million (44.3), and the adjusted EBITDA margin decreased to 17.4% (18.4).
· Group operating profit decreased to EUR 22.4 million (26.6), and the operating profit margin decreased to 10.1% (11.0).
· Group adjusted operating profit decreased to EUR 29.1 million (33.3), and the adjusted operating profit margin decreased to 13.1% (13.8).
· Games’ gross bookings declined by 7.0% to EUR 208.3 million (224.1). Comparable (*) gross bookings declined by 6.1%.
· User acquisition investments decreased to EUR 66.3 million (73.2), representing 30.7% of games’ revenue (31.5).
· Operating cash flow decreased to EUR -1.2 million (37.9) due to changes in working capital, the New Mexico lawsuit settlement payment in January and costs related to the acquisition by SEGA.
· Earnings per share were stable at EUR 0.30 (0.30). Adjusted earnings per share declined to EUR 0.37 (0.38).
*) Comparable growth is calculated at constant USD/EUR exchange rates.

*Key figures*
*7–9/* *7–9/* *Change,* *1–9/* *1–9/* *Change,* *1–12/*
*EUR million* *2023* *2022* *%* *2023* *2022* *%* *2022*
Revenue 73.1 77.4 -5.6% 221.8 240.8 -7.9% 317.7
EBITDA 10.0 12.2 -17.9% 32.0 37.6 -14.9% 43.3
EBITDA margin 13.7% 15.7%   14.4% 15.6%   13.6%
Adjusted EBITDA 15.8 15.7 1.0% 38.7 44.3 -12.8% 53.9
Adjusted EBITDA margin, % 21.7% 20.2%   17.4% 18.4%   17.0%
Operating profit 6.7 8.6 -22.0% 22.4 26.6 -15.8% 28.6
Operating profit margin, % 9.1% 11.1%   10.1% 11.0%   9.0%
Adjusted operating profit 12.5 12.1 3.8% 29.1 33.3 -12.8% 39.2
Adjusted operating profit margin, % 17.1% 15.6%   13.1% 13.8%   12.3%
Profit before tax 9.3 10.2 -8.9% 26.5 30.4 -12.9% 30.6
Adjusted profit for the period 13.6 10.4 30.8% 28.4 28.2 0.8% 31.4
Capital expenditure 1.8 1.3 34.5% 6.3 4.6 38.7% 7.0
User acquisition 21.1 21.3 -0.9% 66.3 73.2 -9.5% 96.5
Return on equity (ROE), % 11.5% 19.0%   11.5% 19.0%   14.4%
Net gearing ratio, % -62.6% -81.3%   -62.6% -81.3%   -72.7%
Equity ratio, % 86.0% 72.3%   86.0% 72.3%   79.3%
Earnings per share, EUR 0.12 0.10 16.5% 0.30 0.30 -0.4% 0.30
Earnings per share, diluted EUR 0.12 0.10 17.1% 0.30 0.30 -0.5% 0.30
Adjusted earnings per share, EUR 0.18 0.14 29.7% 0.37 0.38 -0.8% 0.42
Net cash flows from operating activities -0.9 8.6 -110.9% -1.2 37.9 -103.3% 49.9
Employees (average for the period) 558 522 6.9% 560 506 10.7% 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*
In the third quarter of 2023, Rovio moved on to a new phase, as SEGA gained control of 97.7% of Rovio’s issued and outstanding shares. While the market dynamics continued to be weaker than last year, we remained disciplined in our own operations and focused on finding out synergies that our life with SEGA may entail to bring out the best in Rovio.

The global mobile gaming market declined in the third quarter by 0.7% compared to the same period in the previous year but remained stable sequentially. At Rovio, our comparable gross bookings increased by 0.7% and 3.8%, respectively. As in the previous quarters, the growth was primarily driven by Angry Birds Dream Blast.

We have high ambitions in terms of developing our top live games further and launching new ones. We strengthened the team in Stockholm, in the home nest of Angry Birds 2, by appointing Johannes Mang as the new Head of Studio. Johannes brings with him a storied history of working in games as a service, as well as new product and feature development in AAA and mobile games. Regarding our new titles, we are working on improving the monetization of Moomin: Puzzle & Design and are planning the global launch window for the first quarter of 2024.

Our brand licensing business has continued to showcase new content, with Angry Birds Slingshot Stories, one of the IP’s most beloved short format series, just returning with a new season in October for the fans to dig into. The previous seasons have boasted over 120 million views on the Angry Birds YouTube channel alone, which demonstrates the enduring popularity of this entertaining franchise.

SEGA’s acquisition of Rovio has progressed to the point that they have commenced redemption proceedings in respect of Rovio’s minority shares in order to obtain ownership of all the issued and outstanding shares. At the same time, the synergy and integration work that we conduct in good cooperation with SEGA is progressing at full speed. We look forward to reaping the benefits and are beyond excited about the future opportunities that the vibrant IPs and talents we have together will bring.

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

*Additional information on user acquisition investments in Q4 2023*
User acquisition investments in Q4 2023 are expected to be 25–30% of games’ revenues.

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

*More information*
Alex Pelletier-Normand, CEO, tel. +358 40 730 3442 (Investor Relations phone)
René Lindell, CFO, tel. +358 40 730 3442 (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. Sega Europe Limited has acquired more than 90 percent of Rovio’s issued and outstanding shares and will delist the company from NASDAQ Helsinki stock exchange as soon as permitted under applicable laws.

*Attachment*

· Rovio Q3-2023_interim report