rovio finland · user acquisition investments will be below 40% for 2019, which should support...

Rovio FinlandTelecom Equipment and IT

Commissioned Equity Research • 3 February 2020

KEY DATA

FinlandStock countryROVIO FHBloombergROVIO.HEReutersEUR 4.53 Share price (close)

Free FloatEUR 0.37/EUR 0.37Market cap. (bn)

http://www.rovio.com/Website12 Feb 2020Next report date

PERFORMANCE

Sep17 Jul18 Apr19 Jan202

4

6

8

10

12

RovioFinland OMX Helsinki All-Share (Rebased)

Source: Thomson Reuters

VALUATION APPROACH

6.2

5.8

3.6

4.8

8.0

8.0

5.3

6.4

2 4 6 8 10

DCF

EV/EBIT

Source: Nordea estimates

ESTIMATE CHANGES

2021E2020E2019EYear2%-2%-1%Sales

-2%-9%4%EBIT (adj)Source: Nordea estimates

All eyes on 2020 game launches

Rovio launched two games in 2019, of which the first has been a success, reaching EUR ~90m yearly run-rate revenues in Q4, we estimate. The second, however, has not scaled up as fast, which leads us to expect that user acquisition investments will be below 40% for 2019, which should support adjusted EBIT during Q4. We believe investor focus is on the upcoming game launches in 2020. We expect 10% sales growth (versus Thomson Reuters consensus of 4%) and high user acquisition investments for the year on the back of the current growth games and two new game launches. Our DCF- and multiples-based valuation range is EUR 5.1-6.9.

Ahead of consensus on Q4 2019E EBIT, in line on salesRovio lowered its sales and adjusted EBIT margin guidance in September 2019. Revenue guidance was downgraded due to lower-than-expected performance of the Brand Licensing unit and older games. The lower margin guidance was caused by increased user acquisition (UA) expenses, as the company aimed to invest 35-40% of the Games unit's full-year revenue in UA. We believe UA investments will be around 38% of Games' revenue, because one of Rovio's two growth games has not scaled up as fast as expected. This leads us to expect full-year revenue of EUR 298m with an adjusted EBIT margin of 7%. For Q4, we expect adjusted EBIT of EUR 4m versus Thomson Reuters consensus of EUR 1m.

2020 estimate revisions driven by Hatch expensesThe company expected to find an external financing partner for its 80%-owned subsidiary, Hatch Entertainment, in 2019, but the process was prolonged to 2020. We delay the partial divestment of Hatch from Q1 2020E to Q3 2020E, which increases expenses for 2020E (Hatch expenses of EUR 11m in 2020E). We expect the company to shed more light on the outlook for Hatch in conjunction with its Q4 report. Our current estimates do not include any revenue from Hatch.

Fair valuation range at EUR 5.1-6.9 per shareWe derive a DCF-based fair value range of EUR 6.2-8.0 per share by applying a WACC range of 8.5-12.5%. We also include a relative valuation by applying a 20% range to EV/EBIT, P/E and EV/sales multiples derived from Western mobile gaming peers. The average of these valuation approaches yields a fair value range of EUR 5.1-6.9 per share (4.8-6.6 previously). We note that Rovio is currently trading at a notable discount to its peers. When looking at 2020E EV/sales, Rovio trades at over a 50% discount to its peers.

Nordea Markets - AnalystsSami SarkamiesSenior Analyst

Veikkopekka SilvastiAnalyst

SUMMARY TABLE - KEY FIGURES2021E2020E2019E2018201720162015EURm

348328298281297192142Total revenue483638486535-6EBITDA (adj)402522313617-22EBIT (adj)

11.4%7.5%7.5%11.1%12.1%8.8%-15.2%EBIT (adj) margin0.390.240.210.300.330.14-0.24EPS (adj)

62.0%14.1%-29.7%-7.7%130.7%158.8%-323.7%EPS (adj) growth0.120.090.090.090.060.060.00DPS (ord)0.50.60.80.72.2n.a.n.a.EV/Sales4.48.310.15.917.8n.a.n.a.EV/EBIT (adj)

11.618.721.412.727.6n.a.n.a.P/E (adj)1.82.02.21.95.2n.a.n.a.P/BV

2.7%1.9%2.0%2.4%0.7%n.a.n.a.Dividend yield (ord)9.8%7.5%8.1%14.0%8.2%n.a.n.a.FCF Yield bef A&D, lease -193-163-143-120-88-10-10Net debt-4.0-4.5-3.8-2.5-1.5-0.31.5Net debt/EBITDAn.m.84.0%52.7%53.6%43.9%18.5%-31.6%ROIC after tax

Source: Company data and Nordea estimates

Marketing material commissioned by Rovio

Rovio3 February 2020

Game portfolio updateWe expect Rovio to launch two new games per year in 2020-21. We estimate that each new game will scale up revenues for four quarters before peaking at EUR ~8m quarterly revenue. Rovio's game portfolio is divided into growth games, earn games and catalogue games. The older catalogue games and earn games are set to gradually decline in size, while we expect growth games to improve their performance for a few quarters before starting their gradual decline.

Game overview by lifecycleRovio currently has over 20 live games in different lifecycle phases. At its CMD in November, the company divided its game portfolio into three categories to describe the future growth prospects and profitability of its various games:

Growth games: These are games that Rovio aims to scale up with significant user UA investments. They have large developer teams and low to negative profit margins. Rovio's current growth games are AB Dream Blast and Sugar Blast. We also allocate all forecast game launches to this category.

Earn games: These are games that Rovio aims to maintain at their current size or grow slightly. They may still have significant UA investments, but notably lower than for growth games. Development teams are still large, and focus is on live operations and new features, as well as events. Earn games have moderate to high profit margins. Current earn games are AB 2, AB Match and AB Friends.

Catalogue games: These are old and small games that require no significant UA investments or development teams. Revenue from these games decline over time as their user bases decrease. Catalogue games have very high profit margins. Current catalogue games include AB Pop and over 20 other small games.

GAME PORTFOLIO OVERVIEW BY LIFECYCLE

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Catalogue Earn


Revenue growth driven by upcoming game launchesWe expect Rovio's older game portfolio to decline in size, while we assume that upcoming game launches will bring in revenue growth. We expect Rovio to launch two new games per year during 2020-21. Our revenue assumptions for the upcoming game launches and the expected launch schedule are shown in the chart below.

Marketing material commissioned by Rovio 2


QUARTERLY GROSS BOOKINGS, HISTORY AND ESTIMATES PER GAME (EURm)

0

10

20

30

40

50

60

70

80

90

100

0

5

10

15

20

25

30

35

AB Friends AB Dream Blast

AB POP Other games New Game 1/2020

New Game 2/2020 New Game 1/2021 New Game 2/2021 Total Games revenue


Expected game launch schedule for 2020-21Rovio's growth will be driven by upcoming game launches. We expect the company to launch two games in both 2020 and 2021.

ROVIO'S ESTIMATED GAME LAUNCH SCHEDULE


Assumptions for upcoming game launchesWe expect the new games to reach quarterly peak sales of EUR ~8m in the fifth quarter after launch. We also model high UA investments during the scale-up period of new games. We see the EUR 8m quarterly peak sales as a fairly conservative assumption given that AB Dream Blast, which was launched in Q1 2019, reached quarterly sales of EUR 18m in Q3 2019, and is still growing at a healthy pace during Q4 2019.

However, in 2017, Rovio launched a few games that have not been as successful. Both AB Evolution and Battle Bay peaked in the second quarter after their launch and declined fairly rapidly after reaching peak sales. AB Evolution peaked at EUR 10m, while Battle Bay's peak sales were only EUR ~5m.

The most successful game from 2017 has been AB Match, which was launched in Q3 2017. The game reached its peak sales of EUR 7.4m in just the second quarter after its launch but has since been able to retain a long tail of relatively stable earnings.



NEW GAME LAUNCH REVENUE ASSUMPTIONS VS AB DREAM BLAST AND AB MATCH (EURm)

1 2 3 4 5 6 7

AB Dream Blast (so far) 0.5 6.9 14.0 17.8Growth q/q 1280% 103% 27%AB Match (actual) 2.7 7.4 6.2 6.8 6.5 6.7 6.8Growth q/q 174% -16% 10% -4% 3% 1%AB Evolution (actual) 2.7 10.1 8.7 5.5 4.2 3.3 3.3Growth q/q 274% -14% -37% -24% -21% 0%Battle Bay (actual) 4.3 4.6 3.8 3.5 2.3 1.9 1.6Growth q/q 7% -17% -8% -34% -17% -16%

0.6 4.8 7.3 8.1 8.2 8.0 7.711% -3% -4%




Estimate revisionsRevisionsWe update our estimates for live games and also refine our assumptions for future game launches. Our adjusted EBIT revisions for 2020 are due to higher Hatch expenses. We had earlier assumed that Rovio would have found a financing partner for Hatch in Q4 2019, but we now expect any decrease in Hatch expenses to take place in Q3 2020 and beyond.

ESTIMATE REVISIONS

71 270 309 335 74 272 317 327 -3% -1% -2% 2%Brand Licensing 9 28 19 13 9 28 19 13 0% 0% 0% 0%Other 0 0 0 0 0 0 0 0

80 298 328 348 82 300 336 341 -3% -1% -2%

6 32 37 50 5 32 36 50 13% 2% 3% 1%Brand Licensing 3 7 5 2 3 7 5 2 0% 0% 0% 0%Other -5 -17 -17 -13 -5 -17 -14 0% 0% 25% 12%

4 22 25 40 3 21 27 41 -9% -2%

Adj. EBIT ex Hatch 7 33 36 44 6 32 34 45 -2%

Adj. EBIT margin7.9% 12.1% 12.0% 15.0% 6.8% 11.7% 11.4% 15.3% 1.1pp 0.3pp 0.7pp -0.2pp

Brand Licensing 34.9% 25.8% 25.2% 18.1% 34.9% 25.8% 25.2% 18.1% 0.0pp 0.0pp 0.0pp 0.0ppOther

11.4% 0.9pp 0.3pp -0.5pp -0.6pp

Margin ex. Hatch 11.2% 1.0pp 0.4pp 0.8pp -0.6pp

0.04 0.21 0.25 0.40 0.03 0.20 0.27 0.41 20% 3% -9% -2%0.09 0.09 0.12 0.06 0.08 0.12 37% 3% -2%


Our estimates versus consensusOur Q4 2019 revenue estimate is in line with Thomson Reuters consensus, but we expect higher profitability driven by lower user acquisition expenses.

For 2020-21, we expect revenue growth, driven by new game launches, whereas consensus expects slow growth in 2020 and no growth in 2021. We are below consensus EBIT for 2020E, as we assume high user acquisition investments and continued investments in Hatch Entertainment. For 2021E, we are above on adjusted EBIT.

ROVIO ENTERTAINMENT: OUR ESTIMATES VS CONSENSUS

80.2 297.7 328.1 348.2 80.5 297.5 310.5 310.08.0 37.8 36.2 48.2 6.5 36.5 40.0 42.5 -9%

10.0% 12.7% 11.0% 13.8% 8.1% 12.3% 12.9% 13.7% 1.9pp 0.4pp -1.8pp 0.1pp3.9 22.2 24.6 39.8 1.0 20.0 28.0 38.5 11% -12%

4.9% 7.5% 7.5% 11.4% 1.2% 6.7% 9.0% 12.4% 3.7pp 0.7pp -1.5pp -1.0pp7.1 33.2 35.9 44.2 n.a n.a n.a n.a n.a n.a n.a n.a

8.9% 11.2% 10.9% 12.7% n.a n.a n.a n.a n.a n.a n.a n.aPTP 3.9 22.5 24.6 39.8 2.0 21.0 28.0 36.0 -12% 11%

0.04 0.21 0.25 0.40 0.02 0.20 0.27 0.34 -9%0.04 0.21 0.25 0.40 0.02 0.20 0.27 0.34 -9%

0.09 0.09 0.12 0.08 0.10 0.12 -8%

Source: Thomson Reuters and Nordea estimates



Risk factorsBelow, we list the main risk factors that we find relevant for Rovio. The purpose of this is not toprovide a comprehensive list of all of the risks that the company may face, but instead to highlight those that we find most relevant. In our view, the relevant short-term risks mainly come from external sources.

Decline of the appeal of the Angry Birds brandThough Rovio has launched non-Angry Birds games, the company's revenue effectively comes from Angry Birds-related games and licensing. Thus, a decline of the appeal of the brand would have notable consequences, especially for the licensing business.

Ability to attract and retain top talent Given the global and highly competitive nature of the mobile gaming market, Rovio's success depends heavily on attracting and retaining top international specialists and executives.

Ability to develop games with lucrative feature setsAccording to a study by GameRefinery, 50% of a game's success is explained by its feature set. Mobile gaming is still a nascent industry, which means that 'a winning feature set' is a constantly moving target, making success extremely hard to replicate in subsequent games.

Failure to create new IPs and enter new genresRovio's current game portfolio is dependent on AB themed casual games, such as slingshot, match 3 and bubble popping games. In the future Rovio aims to enter the mid-core genre with new games without the AB brand. This may turn out to be a costly task, eroding Rovio's profitability and cash position.

RegulationThe mobile gaming industry is facing increasing regulation, especially in China. The trend towards tighter regulation of mobile game monetisation could hamper the financial performance of Rovio in the long run.

Rising user acquisition costsAccording to Neogames, a Finnish game industry organisation, challenges in discoverability and rising user acquisition costs have been a challenge in the games industry for years. This risk applies especially to smaller companies with limited marketing resources.



Detailed estimatesREPORTED ANNUAL NUMBERS AND ESTIMATES (EURm AND %)

2017 2018Revenue 297 281 298 328 348 362 377 393 5% 4%Materials and services 82 80 78 89 96 99 104 109 5% 4%Employee benefits expense 52 43 43 44 44 45 46 47 1% 2%Other operating expenses 104 112 138 158 160 160 167 174 9% 3%

60 48 38 36 48 58 61 64 0% 10%65 48 38 36 48 58 61 64 0% 10%31 32 22 25 40 52 56 60 6% 15%36 31 22 25 40 52 56 60 6% 15%

Adj. EBIT (excl. Hatch) 36 39 33 36 44 52 56 60 3% 12%27 32 23 25 40 52 56 60 5% 15%21 25 17 20 32 42 45 48 7% 15%

0.27 0.31 0.21 0.25 0.40 0.52 0.56 0.61 7% 15%0.06 0.09 0.09 0.09 0.12 0.16 0.17 0.18 8% 15%

Revenue growth (y/y) -5.4% 5.9% 10.2% 6.1% 3.8% 4.2% 4.5%Revenue growth (q/q)Payout ratio 22% 29% 42% 35% 30% 30% 30% 30%

22% 17% 13% 14% 16% 16% 16%12% 7% 8% 14% 15% 15%12% 14% 13% 14% 15% 15%-88 -120 -143 -163 -193 -227 -259 -293

-63% -75% -84% -90% -93% -95% -96% -96%


REPORTED QUARTERLY NUMBERS AND ESTIMATES (EURm AND %)

Revenue 71 72 75 80 78 78 82 89 84 87 87 90Materials and services 20 19 19 21 21 21 22 24 23 24 24 25Employee benefits expense 9 13 10 12Other operating expenses 31 31 37 40 38 37 41 42 37 39 41 42

10 10 8 8 8 8 12 13 13 1210 10 8 8 8 8 12 13 13 12

8 5 5 4 5 5 5 9 9 108 5 5 4 5 5 5 9 9 10

Adj. EBIT (excl. Hatch) 9 8 9 7 9 9 8 12 12 108 5 6 4 5 5 5 9 9 106 3 5 3 4 4 4 7 9 8 7 8

0.07 0.04 0.06 0.04 0.05 0.06 0.05 0.09 0.11 0.11 0.09 0.10

Revenue growth (y/y) 8% 0% 5% 10% 10% 9% 10% 7% 6% 1%Revenue growth (q/q) -2.5% 1.3% 4.2% 7.2% -2.5% 0.3% 5.0% 8.0% -5.7% 3.6% 0.5% 2.9%Payout ratio 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

15% 13% 13% 10% 9% 13% 15% 15% 12% 13%7% 7% 5% 7% 7% 6% 10% 13% 12% 10%

13% 9% 10% 12% 14% 13% 12%




REPORTED ANNUAL NUMBERS AND ESTIMATES BY SEGMENT (EURm AND %)

2017 2018

Revenue 248 250 270 309 335 352 369 388 10% 5%70 79 101 120 123 123 129 136 16% 3%43 41 37 40 53 65 69 73 9%43 41 37 40 53 65 69 73 9%38 38 32 37 50 63 67 72 9% 13%39 39 32 37 50 63 67 72 9% 13%

UAC of revenue 28% 31% 38% 39% 37% 35% 35% 35%17% 16% 14% 13% 16% 18% 19% 19%16% 15% 12% 12% 15% 18% 18% 18%72% 85% 97% 109% 113% 114%

Revenue growth (y/y) 56% 1% 8% 15% 8% 5% 5% 5%Revenue growth (q/q)UAC growth 13% 29% 18% 3% 0% 5% 5%Adj. EBITDA growth -6% -10% 10% 30% 23% 6% 6%Adj. EBIT growth 1% -16% 15% 35% 25% 7% 7%

2017 2018

Revenue 49 31 28 19 13 10 8 6 -24% -24%30 21 18 13 8 6 4 3 -28% -24%32 21 18 13 8 6 4 3 -28% -24%6 7 7 5 2 2 2 2 -30% -9%8 7 7 5 2 2 2 2 -30% -9%

65% 68% 65% 66% 58% 58% 58% 58%13% 23% 26% 25% 18% 22% 24% 31%50% 43% 48% 35% 16% 10% 7% 5%

Revenue growth (y/y) -37% -9% -33% -29% -25% -24% -22%Revenue growth (q/q)Adj. EBITDA growth -35% -13% -31% -38% -25% -24% -22%Adj. EBIT growth -14% 2% -34% -49% -10% -16% -2%

2017 2018Revenue 0 0 0 0 0 0 0 0

-13 -13 -17 -17 -12 -12 -12 -12-14 -17 -17 -12 -12 -12 -12

-14 -14 -17 -17 -13 -13 -13 -13-15 -17 -17 -13 -13 -13 -13

0.4 1 1.5 2.2 2.4 2.6 2.8 3




REPORTED QUARTERLY NUMBERS AND ESTIMATES BY SEGMENT (EURm AND %)

Revenue 66 65 66 71 73 74 78 84 81 84 84 8624 21 27 29 29 28 31 32 29 30 32 32

8 7 9 10 9 14 14 12 128 7 9 10 9 14 14 12 12

10 9 7 6 8 9 9 13 14 12 1210 9 7 6 8 9 9 13 14 12 12

UAC of revenue 36% 33% 41% 41% 39% 38% 39% 38% 36% 36% 38% 38%17% 16% 13% 9% 13% 14% 12% 14% 17% 17% 15% 14%16% 14% 8% 12% 12% 13% 16% 16% 14% 14%

107% 109% 86% 83% 119% 126% 97% 108% 117% 102%

Revenue growth (y/y) 17% 0% 5% 10% 13% 18% 17% 10% 13% 8% 3%Revenue growth (q/q) 2% -1% 2% 8% 3% 1% 6% 7% -4% 4% 1% 2%UAC growth 2% -10% 27% 7% 0% -4% 4% -10% 4% 5% 2%Adj. EBITDA growth 36% -7% -21% -20% 42% 7% -6% 21% 19% 4% -13% 0%Adj. EBIT growth 32% -8% -24% -22% 50% 9% -5% 24% 21% 4% -14% 0%

Revenue 5 6 8 9 5 5 4 5 3 3 3 43 4 6 6 3 3 3 4 2 2 2 23 4 6 6 3 3 3 4 2 2 2 21 1 3 3 1 1 1 2 1 1 0 11 1 3 3 1 1 1 2 1 1 0 1

54% 58% 71% 68% 66% 65% 65% 68% 58% 57% 56% 61%13% 9% 36% 35% 25% 23% 23% 30% 20% 15% 13% 23%24% 39% 63% 75% 37% 36% 37% 31% 15% 15% 15% 19%

Revenue growth (y/y) -48% -2% 6% 17% 4% -28% -50% -39% -29% -28% -31% -30%Revenue growth (q/q) -39% 39% 31% 4% -45% -3% -9% 26% -36% -1% -12% 27%Adj. EBITDA growth -50% 48% 62% 0% -47% -4% -9% 33% -46% -2% -15% 39%Adj. EBIT growth -74% 0% 400% 2% -62% -10% -9% 65% -57% -25% -29% 129%

Revenue 0 0 0 0 0 0 0 0 0 0 0 0-3 -5 -5 -5 -4 -5 -5 -3 -3 -3 -3 -2-3 -5 -5 -5 -4 -5 -5 -3 -3 -3 -3 -2-3 -5 -5 -5 -4 -5 -5 -4 -3 -4 -4 -3-3 -5 -5 -5 -4 -5 -5 -4 -3 -4 -4 -3




ESTIMATED KPIs FOR ROVIO'S GAME PORTFOLIO, ANNUAL

GAME KPIs 2017 2018

Gross bookings - TOP 5 200.9 213.3 230.3 233.4 195.4Gross bookings - All 248.6 253.3 267.5 309.1 334.8

200.9 213.3 230.3 233.4 195.4248.6 253.3 267.5 309.1 334.8

4.6 3.7 3.7 3.7 3.0DAU - All 10.4 8.1 6.4 6.4 6.3

23.8 19.6 18.5 19.2 16.1MAU - All 76.8 58.9 44.2 40.9 40.1

19% 19% 20% 20% 19%DAU/MAU - All 14% 14% 15% 16% 16%

0% 82% 95% 104% 84%MAU retention - All 0% 77% 75% 93% 98%

0.5 0.5 0.4 0.4 0.30.6 0.5 0.5 0.5 0.5

Conversion rate (TOP5) 2.0% 2.3% 2.3% 2.1% 2.1%Conversion rate (All) 0.7% 0.9% 1.1% 1.2% 1.2%

0.12 0.16 0.17 0.17 0.180.07 0.09 0.11 0.13 0.1532.9 36.0 41.6 49.0 48.932.9 35.7 41.1 52.3 58.0


ESTIMATED KPIs FOR ROVIO'S GAME PORTFOLIO, QUARTERLY

GAME KPIs

Gross bookings - TOP 5 56 57 57 60 59 59 58 57 52 50 48 46Gross bookings - All 66 65 65 71 73 74 78 84 81 84 84 86

223 225 228 230 234 235 236 233 226 217 207 195261 261 263 268 275 284 297 309 316 326 332 335

3.5 3.4 3.8 3.9 3.9 3.8 3.7 3.6 3.3 3.1 3.0 2.8DAU - All 7.0 6.6 5.9 6.3 6.3 6.2 6.4 6.6 6.4 6.4 6.3 6.2

17.1 16.2 20.7 20.2 19.9 19.5 18.9 18.5 17.5 16.5 15.7 14.8MAU - All 49.3 45.3 40.7 41.4 41.1 40.3 40.7 41.7 40.9 40.6 39.6 39.2

20% 21% 18% 19% 20% 20% 20% 20% 19% 19% 19% 19%DAU/MAU - All 14% 15% 14% 15% 15% 15% 16% 16% 16% 16% 16% 16%

95% 95% 128% 98% 99% 98% 97% 97% 95% 95% 95% 95%MAU retention - All 98% 92% 90% 102% 99% 98% 101% 103% 98% 99% 97% 99%

0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.30.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Conversion rate (TOP5) 2.5% 2.4% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%Conversion rate (All) 1.0% 1.0% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%

0.18 0.18 0.16 0.17 0.17 0.17 0.17 0.17 0.17 0.18 0.18 0.180.10 0.11 0.12 0.12 0.13 0.13 0.13 0.14 0.14 0.14 0.15 0.1539.0 41.5 38.0 48.1 48.0 48.5 49.5 50.0 47.5 48.5 49.6 50.038.5 40.4 37.7 47.9 49.6 50.8 53.3 55.7 54.7 57.2 59.2 61.0




ESTIMATED KPIs FOR ROVIO'S CURRENT TOP FIVE GAMES (MILLION AND %), ANNUAL

GAME KPIs 2017 2018

78.7 117.3 107.2 89.3 67.29.4 10.7 8.5 7.1 5.7

19% 19% 20% 20% 18%1.8 2.0 1.7 1.4 1.0

0.12 0.16 0.17 0.17 0.18AB Friends

32.7 31.3 25.9 21.1 16.93.9 2.9 2.1 1.9 1.50% 0% 0% 0% 0%0.8 0.5 0.4 0.3 0.3

0.12 0.16 0.17 0.17 0.17AB Dream Blast

0.0 0.5 61.6 95.8 90.00.0 0.2 5.0 7.6 6.90% 19% 20% 20% 20%0.0 0.0 1.0 1.5 1.4

0.00 0.18 0.17 0.17 0.18AB Match

10.1 26.2 24.5 18.9 14.62.1 2.4 2.0 1.8 1.4

20% 19% 19% 18% 18%0.4 0.5 0.4 0.3 0.3

0.13 0.16 0.17 0.16 0.16

22.3 15.3 11.3 8.3 6.72.7 1.4 0.9 0.8 0.6

19% 19% 19% 18% 18%0.5 0.3 0.2 0.1 0.1

0.12 0.16 0.17 0.16 0.16


ESTIMATED KPIs FOR ROVIO'S TOP FIVE GAMES CURRENTLY (MILLION AND %)

GAME KPIs

32.0 26.5 25.0 23.7 23.2 22.5 22.1 21.4 17.9 17.2 16.5 15.79.8 7.6 9.0 7.7 7.5 7.2 6.9 6.7 6.3 5.9 5.5 5.2

20% 21% 18% 20% 20% 20% 20% 20% 18% 18% 18% 18%2.0 1.6 1.7 1.5 1.5 1.4 1.4 1.3 1.1 1.1 1.0 0.9

0.18 0.18 0.16 0.17 0.17 0.17 0.17 0.17 0.18 0.18 0.18 0.18AB Friends

7.2 6.6 6.2 5.9 5.6 5.3 5.2 5.0 4.6 4.3 4.1 3.92.2 1.9 2.2 2.2 2.1 2.0 1.9 1.8 1.7 1.5 1.4 1.3

20% 21% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18%0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.2

0.18 0.18 0.16 0.16 0.16 0.16 0.17 0.17 0.17 0.17 0.17 0.17AB Dream Blast

6.9 14.0 17.8 22.9 23.3 23.8 24.3 24.5 23.2 22.8 22.3 21.72.1 4.0 6.4 7.4 7.5 7.6 7.6 7.6 7.3 7.0 6.7 6.5

20% 21% 18% 20% 20% 20% 20% 20% 20% 20% 20% 20%0.4 0.8 1.2 1.5 1.5 1.5 1.5 1.5 1.5 1.4 1.3 1.3

0.18 0.18 0.16 0.17 0.17 0.17 0.17 0.17 0.18 0.18 0.18 0.18AB Match

6.8 6.6 5.7 5.4 5.1 4.8 4.6 4.4 4.0 3.8 3.5 3.32.1 1.9 2.1 2.0 1.9 1.8 1.7 1.7 1.5 1.4 1.3 1.2

20% 21% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18%0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2

0.18 0.18 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16

3.3 3.0 2.7 2.3 2.2 2.1 2.0 2.0 1.8 1.7 1.6 1.51.0 0.9 1.0 0.9 0.8 0.8 0.8 0.7 0.7 0.7 0.6 0.6

20% 21% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18%0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1

0.18 0.18 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16




Reported numbers and forecastsINCOME STATEMENT

2021E2020E2019E20182017201620152014201320122011EURm348328298281297192142158n.a.n.a.n.a.Total revenue

6.1%10.2%5.9%-5.4%55.0%34.9%-10.3%n.a.n.a.n.a.n.a.Revenue growthn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.of which organicn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.of which FX

483638486035-617000EBITDA00000000000Depreciation and impairments PPE00000000000of which leased assets

483638486035-617000EBITA-8-12-16-16-29-18-15-7000Amortisation and impairments402522323117-2210n.a.n.a.n.a.EBIT00000000000of which associates00000000000Associates excluded from EBIT0001-5-111000Net financials00000000000of which lease interest00000000000Changes in value, net

402523322716-2111000Pre-tax profit-8-5-5-8-6-53-3000Reported taxes322017252111-188000Net profit from continued operations00000000000Discontinued operations00000000000Minority interests

322017252111-188000Net profit to equity0.390.240.210.310.270.14-0.240.11n.a.n.a.n.a.EPS0.120.090.090.090.060.060.000.040.000.000.00DPS0.120.090.090.090.060.060.000.040.000.000.00of which ordinary0.000.000.000.000.000.000.000.000.000.000.00of which extraordinary

Profit margin in percent13.8%11.0%12.7%17.0%20.2%18.5%-4.5%10.8%n.a.n.a.n.a.EBITDA13.8%11.0%12.7%17.0%20.2%18.5%-4.5%10.8%n.a.n.a.n.a.EBITA11.4%7.5%7.5%11.2%10.6%8.8%-15.2%6.3%n.a.n.a.n.a.EBIT

Adjusted earnings483638486535-617000EBITDA (adj)483638486535-617000EBITA (adj)402522313617-2210000EBIT (adj)

0.390.240.210.300.330.14-0.240.11n.a.n.a.n.a.EPS (adj)

Adjusted profit margins in percent13.8%11.0%12.7%16.9%21.7%18.5%-4.5%10.8%n.a.n.a.n.a.EBITDA (adj)13.8%11.0%12.7%16.9%21.7%18.5%-4.5%10.8%n.a.n.a.n.a.EBITA (adj)11.4%7.5%7.5%11.1%12.1%8.8%-15.2%6.3%n.a.n.a.n.a.EBIT (adj)

Performance metricsCAGR last 5 years

12.7%18.2%13.5%n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.Net revenue6.4%n.m.17.3%n.m.n.m.n.m.n.m.n.m.n.m.n.m.n.m.EBITDA

18.7%n.m.17.4%n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.EBIT22.6%n.m.14.5%n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.EPS15.1%n.m.17.2%n.m.n.m.n.m.n.m.n.m.n.m.n.m.n.m.DPS

Average last 5 years9.6%9.1%6.7%6.4%n.a.n.a.n.a.n.a.n.a.n.a.n.a.Average EBIT margin

14.8%15.6%14.4%14.4%n.a.n.a.n.a.n.a.n.a.n.a.n.a.Average EBITDA marginVALUATION RATIOS - ADJUSTED EARNINGS

2021E2020E2019E20182017201620152014201320122011EURm11.618.721.412.727.6n.a.n.a.n.a.n.a.n.a.n.a.P/E (adj)3.65.76.03.89.9n.a.n.a.n.a.n.a.n.a.n.a.EV/EBITDA (adj)3.65.76.03.89.9n.a.n.a.n.a.n.a.n.a.n.a.EV/EBITA (adj)4.48.310.15.917.8n.a.n.a.n.a.n.a.n.a.n.a.EV/EBIT (adj)

VALUATION RATIOS - REPORTED EARNINGS2021E2020E2019E20182017201620152014201320122011EURm

11.618.721.412.533.6n.a.n.a.n.a.n.a.n.a.n.a.P/E0.510.620.760.652.15n.a.n.a.n.a.n.a.n.a.n.a.EV/Sales3.65.76.03.810.7n.a.n.a.n.a.n.a.n.a.n.a.EV/EBITDA3.65.76.03.810.7n.a.n.a.n.a.n.a.n.a.n.a.EV/EBITA4.48.310.15.820.4n.a.n.a.n.a.n.a.n.a.n.a.EV/EBIT

2.7%1.9%2.0%2.4%0.7%n.a.n.a.n.a.n.a.n.a.n.a.Dividend yield (ord.)9.8%7.5%8.1%13.6%7.1%n.a.n.a.n.a.n.a.n.a.n.a.FCF yield9.8%7.5%8.1%14.0%8.2%n.a.n.a.n.a.n.a.n.a.n.a.FCF Yield bef A&D, lease adj

30.9%36.1%41.7%29.4%22.3%42.3%0.0%37.1%n.a.n.a.n.a.Payout ratioSource: Company data and Nordea estimates



BALANCE SHEET2021E2020E2019E20182017201620152014201320122011EURm

1519273953746939000Intangible assets00000000000of which R&D

1519273953746939000of which other intangibles00000000000of which goodwill11111112000Tangible assets00000000000of which leased assets00000000000Shares associates00000000000Interest bearing assets55553160000Deferred tax assets11111121000Other non-IB non-current assets00000000000Other non-current assets

2226334557777742000Total non-current assets00000000000Inventory

2827242329281925000Accounts receivable00000000000Short-term leased assets

1413121113161317000Other current assets19616714612491293454000Cash and bank238207183158133736695000Total current assetsn.a.n.a.n.a.n.a.n.a.n.a.n.a.0000Assets held for sale260232216203190150143138000Total assets

207182170160140877494000Shareholders equity00000000000Of which preferred stocks00000000000Of which equity part of hybrid debt00000000000Minority interest

207182170160140877494000Total Equity00000000000Deferred tax444333160000Long term interest bearing debt00000000000Pension provisions00000000000Other long-term provisions00000000000Other long-term liabilities00000000000Non-current lease debt00000000000Convertible debt00000000000Shareholder debt00000000000Hybrid debt444433170000Total non-current liabilities11111131000Short-term provisions

131312119886000Accounts payable00000000000Current lease debt

3533302937353337000Other current liabilities000001780000Short term interest bearing debt

5047424047605344000Total current liabilities00000000000Liabilities for assets held for sale

260232216203190150143138000Total liabilities and equity

Balance sheet and debt metrics-193-163-143-120-88-10-10-54000Net debt

00000000000of which lease debt-6-6-6-5-41-10-1000Working capital1519274053786841000Invested capital

2101861731631431069994000Capital employed16.4%11.2%10.5%16.3%18.3%13.3%-21.5%17.3%n.m.n.m.n.m.ROE

n.m.84.0%52.7%53.6%43.9%18.5%-31.6%38.7%n.m.n.m.n.m.ROIC20.1%13.7%13.7%21.1%28.9%16.5%-21.5%24.4%n.m.n.m.n.m.ROCE

-4.0-4.5-3.8-2.5-1.5-0.31.5-3.1n.m.n.m.n.m.Net debt/EBITDAn.m.n.m.n.m.n.m.n.m.n.m.n.m.n.m.n.a.n.a.n.a.Interest coverage

79.6%78.4%78.7%78.5%73.8%58.0%51.8%68.0%n.m.n.m.n.m.Equity ratio-93.1%-89.8%-84.3%-75.3%-62.9%-11.4%-13.3%-57.4%n.m.n.m.n.m.Net gearing




CASH FLOW STATEMENT2021E2020E2019E20182017201620152014201320122011EURm

483638486035-617000EBITDA (adj) for associates-8-5-5-11-101-9000Paid taxes0000-1-2-10000Net financials00000-221000Change in provisions000-2-15-6-2000Change in other LT non-IB00000000000Cash flow to/from associates00000000000Dividends paid to minorities00044-150000Other adj to reconcile to cash flow

403133396035-57000Funds from operations (FFO)0103-1-13610000Change in NWC

413233436023117000Cash flow from operations (CFO)-4-4-300000000Capital expenditure362830436023117000Free cash flow before A&D00000000000Proceeds from sale of assets000-1-9-23-44-38000Acquisitions

36283041510-42-21000Free cash flow362830436023117000Free cash flow bef A&D, lease adj

-7-7-7-7-5-50-3000Dividends paid000136000000Equity issues / buybacks0000-17-6250000Net change in debt000-3-1000000Other financing adjustments0001-35-278000Other non-cash adjustments

2920233362-6-1954000Change in cash

Cash flow metrics52.6%36.2%20.5%0.0%0.0%0.0%0.0%0.0%n.m.n.m.n.m.Capex/D&A1.3%1.3%1.1%0.0%0.0%0.0%0.0%0.0%n.a.n.a.n.a.Capex/Sales

Key information55449n.a.n.a.n.a.n.a.n.a.n.a.Share price year end (/current)

368368368303728n.a.n.a.n.a.n.a.n.a.n.a.Market cap.176205226183640n.a.n.a.n.a.n.a.n.a.n.a.Enterprise value81.381.381.379.480.675.974.974.90.00.00.0Diluted no. of shares, year-end (m)




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Market-making obligations and other significant financial interestNordea Markets has no market-making obligations in Rovio.

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Issuer Review

This report has not been reviewed by the Issuer prior to publication.

Completion Date

03 Feb 2020, 07:28 CET

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Nordea Markets Division,Research




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