Rovio

Country:
Sector:
Market cap (m):
Finland
Media
EUR 454.43
Bloomberg:
Reuters:
Website:
ROVIO FH
ROVIO.HE
Share price (close):
EUR 6.19

Latest Reports

12 AUG 2022
Commissioned Research: Flying at a slightly lower altitude
Rovio's Q2 revenue was 5% below Infront consensus, whereas adjusted EBIT was in line. Prevailing mobile gaming market headwinds (reopening, inflation, Apple's ATT policy) proved challenging for growth and recently launched AB Journey seems to be struggling with player engagement. We find the apparent Q3 run-rate recovery in two of Rovio's largest games (AB2 and ABDB) encouraging, but are slightly concerned about KPI softness for AB Journey. We identify the launch of Hunter Assassin 2 (which we model for Q4 2022), potential M&A and signs of revenue recovery for AB Journey as potential catalysts for the share. Marketing material commissioned by Rovio.

11 AUG 2022
Commissioned Research: Flash comment: Q2 numbers soft on revenue and in line on EBIT; Q3 UA guidance of 25-30% lower than we had expected
Rovio’s Q2 revenue of EUR 78.4m came in 5% below consensus and 4% below our estimate whereas adjusted EBIT was bang in line at EUR 11.3m. Games gross bookings grew -6.5% y/y organically (+11% in Q1). Compared to our estimates, all games missed but the miss was relatively larger in Rovio’s most recent game launch AB Journey and the Ruby Games’ hypercasual portfolio. UA costs for Q2 were slightly lower than we had anticipated at 20.9m (Nordea: 21.7m) at 27.5% of Games revenue after 38% in Q1 22 and 32% in Q2 21. The company reiterated its 2022 guidance for strong top-line growth (consensus: +16%) and lower adjusted EBIT (consensus: -1%) for 2022 y/y. UA costs for Q3 were guided at 25-30% of Games revenue, which is below our estimate of 33% and in our view indicates soft KPIs for AB Journey and the global launch of Hunter Assassin likely not taking place during the quarter. Adjusted EBIT growth for H1 has been 31% y/y, which we believe implies elevated UA for Q4 to support growth as well as ramped up recruitments given increased opportunities for talent after layoffs by other industry players, but we also see a possibility for a EBIT guidance revision later this year. At first take, we expect to keep 2022 EBIT estimates to remain broadly unchanged as a function of weaker-than-expected revenue development and lower-than-expected UA, but 2023 could see downgrades given that the lack of a UA ramp-up relative to our estimates.

8 AUG 2022
Commissioned Research: Flash comment: Expectations ahead of Q2 results
Rovio will publish its Q2 report on 11 August at 9:00 EET. For Q2, we expect Games revenue to decrease by 4% q/q (+19% y/y), driven by the lack of releases from Ruby Games and sequentially lower UA spend for AB Journey. Based on Rovio's mid-quarter meeting and data.ai, we believe the older AB games have performed broadly in line with our expectations. UA guidance for Q2 stands at 25-30% of Games revenues, which compares to 38% in Q1 and our Q2 estimate of 27%. Our top-line estimate is in line with pre-Q2 Infront consensus, while our adjusted EBIT estimate is 1% below. Despite the mobile gaming market currently facing headwinds (US market -11% y/y growth in Q2, according to Sensor Tower) from post-pandemic reopening, rising inflation and IDFA deprecation, we expect Rovio to repeat its 2022 outlook for strong top-line growth, supported by the launch of AB Journey (20 January 2022) and the acquisition of Ruby Games (12 August 2021), as well as for declining adjusted EBIT. We forecast 18% top-line growth (7% organic) and an adjusted EBIT decline of 5% for 2022E, which puts us 1% ahead of consensus on sales, but 4% below on EBIT for 2022E. UA guidance for Q3 (Nordea estimate: 33% of Games revenue) will receive focus as a q/q uptick could be an indication of the global launch of Hunter Assassin 2 (which we model for Q3) or an improvement in key KPIs for AB Journey. We find no reason to changes our estimates ahead of the Q2 report.

16 JUN 2022
Commissioned Research: A slightly more conservative view on the outlook
Rovio's performance has exceeded our expectations for three consecutive quarters, and the recent CMD also suggested the company’s focus and execution have improved. However, sequentially lower Games revenue signals a somewhat soft Q2 report. Additionally, market normalisation following a period of abnormally high demand and the limited operational leverage indicated by the company's updated long-term financial targets prompt us to cut estimates for 2022-24. We identify the launch of Hunter Assassin 2 (which we model for Q3 2022) and signs of revenue recovery for AB Journey in Q3 as the next potential catalysts for the share. Marketing material commissioned by Rovio.

10 JUN 2022
Commissioned Research: Flash Comment: Takeaways from Q2 mid-quarter analyst meeting
We attended Rovio’s Q2 mid-quarter meeting for sell-side analysts on Friday hosted by IR Timo Rahkonen, CEO Alexandre Pelletier-Normand and CFO René Lindell. The company continued to highlight near-term headwinds for the mobile gaming market from post-pandemic reopening and Apple’s IDFA changes, which according to data.ai have led to a 6% y/y market decline in April-May. Rovio’s largest market, the US, has taken the biggest hit with a 20% y/y decline, whereas the market in China has been able to grow due to the recent lockdowns. We were left with the impression that Rovio’s Games revenue has witnessed y/y growth, but slight q/q decline in Q2 due sequentially lower UA spend on AB Journey and lack of game releases by Ruby Games. We have been expecting 1% q/q decline in Games revenue, but we note that the sequential decline for Ruby Games does suggest some additional downside to our Q2 estimates as we had expected positive growth for the studio. The older Angry Birds games (AB2, ABDB, AB Friends) have performed broadly in line with our expectations. For Q2, our estimates have been 1% above Infront consensus on top-line, but 3% below on adjusted EBIT. Given the somewhat soft Q2 after a strong Q1 and the market normalisation trends after abnormally high demand, we find limited catalysts for the shares until the launch of Hunter Assassin 2, which should take place in H2 2022E.

12 MAY 2022
Commissioned Research: Flash comment: Key takeaways from CMD
Rovio arranged a CMD yesterday (11 May) in Stockholm, providing an update on its strategy and financial targets as well as deep dives into the Angry Birds brand and technology platform Beacon. The company reiterated its strategy outlines with a sharp focus on wide-appeal casual mobile games, which coupled with the Angry Birds IP has made Rovio a relative winner in the midst of app tracking transparency (ATT) headwinds for the market, in our view. The highlight of the day to us was the deep dive to Rovio’s technology platform Beacon, which appeared as a competitive advantage for Rovio due to its value-add to potential M&A targets and the data-driven decision-making tools for UA optimisation and game development that have also turned out valuable in changing market dynamics. In terms of financial targets, Rovio now aims to grow revenues and EBITDA faster than the western mobile gaming market growth, which admittedly points to limited operational leverage, but highlights the company’s focus on absolute profit and cash flow generation through games with larger scale. Overall, the CMD echoed the company’s improved focus and execution, which is already bearing fruit as witnessed in recent successful growth initiatives (AB Journey, Ruby Games). This keeps us optimistic on a sustainably better growth trajectory for Rovio, even though the normalising mobile gaming market with post-pandemic reopening impacts might present near-term headwinds.

11 MAY 2022
Commissioned Research: Flash comment: Updated financial targets ahead of CMD
Rovio announced updated long-term financial targets this morning ahead of its CMD at 15:00 EET/14:00 CET in Stockholm. The company targets revenue growth faster than western mobile gaming market and adjusted EBITDA growth in line with long-term revenue growth. This compares to Rovio’s previous targets of aiming for Games segment revenue growth faster than western mobile gaming market and a group EBIT margin of 30%, which were introduced in conjunction with the IPO in 2017, but have not seen much attention in Rovio’s investor communication in recent years. Dividend payout target of approximately 30% of adjusted net profit was left intact. According to gaming market research house Newzoo’s most recent forecasts, the mobile gaming market is expected to grow at an 8% CAGR for 2021-24E. Infront consensus (pre-Q1) is currently estimating 6% revenue and 7% adjusted EBITDA CAGR for Rovio for 2021-24E. As a conclusion, we find the new financial targets to be broadly in line with market expectations, although the EBITDA growth target points to limited operational leverage for Rovio in the longer run.

2 MAY 2022
Commissioned Research: Strong Q1 despite normalising gaming market
The Q1 results were testament to Rovio's strong execution, with recent growth initiatives (AB Journey and Ruby Games) bearing fruit and its largest game, high-margin AB2, continuing to grow. The drop-through from top-line growth to adjusted EBIT also surprised significantly on the upside. We remain optimistic about the outlook, given the combination of highly cash-generative older AB games, the growth boost offered by AB Journey and the soft launch pipeline and high capacity for M&A. However, we note downside risks from a normalising operating environment following a period of abnormally high market growth. We raise our fair value range to EUR 7.5-9.8 (7.3-9.4), translating to 7.5-10.6x EV/EBIT for 2023E. Marketing material commissioned by Rovio.

29 APR 2022
Commissioned Research: Flash Comment: Very strong set of Q1 numbers
Rovio reported an extremely strong set of Q1 numbers with 6% beat on the top-line and an adjusted EBIT of EUR 10.0m versus Infront consensus of EUR 3.5m and our estimate of EUR 3.1m. Group organic growth stood at 12%, compared to 6% in Q4 and our estimate of 10%. Relative to our estimates, the top-line beat is encouragingly driven by recently launched AB Journey and the Ruby Games studio that was acquired in August 2021, highlighting success in recent key growth initiatives. UA spend was slightly lower than we anticipated at 38% of Games revenue (our estimate: 40%), which explains EUR 1.2m of the EUR 6.9m EBIT beat relative to our estimates, while the remainder of the positive surprise seems to be a result of operating leverage. Rovio reiterated its guidance for strong top-line growth (consensus +14%) and lower adjusted EBIT (consensus -19%) for 2022. UA costs for Q2 were guided at 25-30% of Games revenue, whereas we have estimated 33%. At first take, we believe the strong Q1 should trigger ~15% earnings upgrades by the consensus for 2022E-23E.

25 APR 2022
Commissioned Research: Feathering its nest
Ahead of Rovio's Q1 report, we adjust our estimates mainly for FX tailwinds from the stronger USD. For Q1, we expect Rovio to demonstrate strong growth on the back of continued good momentum for its largest games and the global launch of AB Journey. We continue to find Rovio's outlook favourable given the combination of highly cash-generative existing Angry Birds games and compelling growth opportunities offered by the recently launched AB Journey and the soft launch pipeline (Hunter Assassin 2, Moomin: Puzzle and Design). Additionally, we argue that high capacity for M&A (EUR ~160m in cash and 9% of own shares) provides further value-creation potential. The company will host a CMD on 11 May, which we expect to shed light on strategy cornerstones as well as provide updated financial targets. We update our fair value range to EUR 7.3-9.4 (7.3-9.3). Marketing material commissioned by Rovio.

Equity analysts

Key persons

CEO: Alexandre Pelletier-Normand

CFO: René Lindell

Chairman: Kim Ignatius

Numbers
Export to Excel
Nordea
EURm
2018
2019
2020
2021
2022E
2023E
2024E
Total revenues
281.2
289.1
272.2
286.2
320.5
343.1
352.2
Ebitda (adj.)
47.60
32.70
64.70
56.72
52.93
59.15
62.71
Ebitda - margin
16.9%
11.3%
23.8%
19.8%
16.5%
17.2%
17.8%
EBIT (adj.)
31.2
18.4
47.2
43.8
38.8
47.0
51.9
EBIT (adj.) margin
11.1%
6.4%
17.3%
15.3%
12.1%
13.7%
14.7%
PTP (adj.)
31.9
18.1
45.4
46.5
41.0
47.0
51.9
Net profit from cont oper (adj)
24.20
13.62
36.80
36.32
31.60
36.46
40.26
Shareholders´ Equity
159.5
168.0
165.4
197.5
217.1
244.0
274.0
Net interest bearing debt
-120.1
-110.4
-129.4
-125.7
-107.1
-137.2
-168.0
Net gearing
-75.3%
-65.7%
-78.2%
-63.6%
-49.3%
-56.2%
-61.3%
Net debt/EBITDA
-2.5
-3.4
-2.2
-2.5
-2.2
-2.3
-2.7
Free cash flow to equity
41.3
6.6
58.9
29.4
-9.6
39.6
41.1
Diluted number of shares in issue, year-end (m)
79.4
81.3
73.4
73.4
73.4
73.4
73.4
Nordea Markets estimates published on Aug 12, 2022
Source: Company data, Nordea estimates
Per share data and multiples
Export to Excel
Nordea
EUR and %
2018
2019
2020
2021
2022E
2023E
2024E
EPS (adj.)
0.31
0.17
0.48
0.49
0.43
0.50
0.55
EPS (adj.) growth
-7.1%
-44.5%
180.7%
4.0%
-13.0%
15.4%
10.4%
DPS
0.09
0.09
0.12
0.12
0.13
0.14
0.15
BVPS
2.0
2.1
2.3
2.7
3.0
3.3
3.7
P/E (adj.)
12.5
26.1
13.3
13.3
14.4
12.5
11.3
EV/Sales
0.65
0.86
1.23
1.25
1.08
0.92
0.81
EV/EBITDA (adj.)
3.85
7.60
5.16
6.30
6.56
5.36
4.57
EV/EBIT (adj.)
5.88
13.49
7.07
8.16
8.96
6.75
5.52
P/BV
1.90
2.14
2.80
2.45
2.09
1.86
1.66
Dividend yield
2.4%
2.0%
1.9%
1.8%
2.1%
2.3%
2.4%
FCF Yield bef A&D, lease adj
13.6%
1.8%
12.6%
7.7%
5.4%
9.5%
9.8%
RoE
16.3%
8.1%
19.3%
16.8%
13.7%
15.8%
15.5%
ROIC
53.6%
30.0%
79.7%
55.9%
30.6%
33.6%
37.7%
Nordea Markets estimates published on Aug 12, 2022
Source: Company data, Nordea estimates

Source: Refinitiv