Rovio Entertainment Corporation        Stock Exchange Release           February 14 th , 2019 at 8:30 a.m. EET

Record gross bookings for Games in Q4, Angry Birds 2 grew 77% year-on-year

October-December 2018 highlights

  • Rovio's revenue was EUR 72.7 million (73.9) or -1.7% decline year-on-year; In comparable currencies, the decline was approximately -3%
  • Rovio's biggest game, Angry Birds 2 gross bookings grew for the fourth consecutive quarter and 77% year-on-year to reach a record number of EUR 35.2 (19.9) million
  • Games segment gross bookings was EUR 66.7 million (66.1) or 1.0% growth year-on-year. In comparable currencies, the two quarters were at a similar level. An increase in deferred revenues in the quarter decreased revenues to EUR 65.2 million (66.1) or -1.4% year-on-year.
  • User acquisition investments were EUR 23.3 million (15.9), or 35.7% of the Games segment's revenue (24.0%)
  • Brand Licensing revenue was EUR 7.5 million (7.8) or -4.0% lower year-on-year
  • Group adjusted operating profit was EUR 5.3 million (10.5) and adjusted operating profit margin 7.2% (14.2 %)
  • Group adjusted operating profit excluding Hatch Entertainment was EUR 8.2 million (12.2) and adjusted operating profit margin 11.2% (16.5%)
  • Operating cash flow was EUR 19.2 million (5.8)
  • Earnings per share was EUR 0.05 (0.10)

January-December 2018 highlights

  • Rovio's revenue decreased by 5.4% to EUR 281.2 million (297.2). In comparable currencies, the revenue decreased by approximately 3%. Year-on-year comparability was also impacted by large revenue peak of Angry Birds Movie in the second quarter in 2017.
  • Games revenue grew 1.0% to EUR 250.4 million (248.0). The growth in comparable currencies was approximately 4%
  • User acquisition investments increased by 12.9% to EUR 78.6 million (69.6) and were 31.4% of the Games segment's revenue (28.1%)
  • Brand Licensing revenue declined as expected year-on-year to EUR 30.8 million (49.2) or -37.4% due to the large revenue peak of the Angry Birds Movie in the second quarter in 2017
  • Group adjusted operating profit was EUR 31.2 million (35.9) and adjusted operating profit margin 11.1% (12.1%)
  • Group adjusted operating profit excluding Hatch Entertainment was EUR 38.4 million (40.7) and adjusted operating profit margin 13.7% (13.7%)
  • Group profit before tax for the year was EUR 32.2 million (26.6)
  • Operating cash flow was EUR 42.6 million (59.6)
  • Earnings per share was EUR 0.31 (0.27)

Key figures

  10-12/ 10-12/ Change, 1-12/ 1-12/ Change,
EUR million 2018 2017 (%) 2018 2017 (%)
Revenue 72.7 73.9 -1.7% 281.2 297.2 -5.4%
EBITDA 9.3 14.0 -33.9% 47.8 60.0 -20.2%
EBITDA margin 12.8% 19.0%   17.0% 20.2%  
Adjusted EBITDA 8.6 14.1 -38.8% 47.5 64.5 -26.3%
Adjusted EBITDA margin, % 11.9% 19.0%   16.9% 21.7%  
Operating profit 5.9 10.4 -43.4% 31.5 31.4 0.4%
Operating profit margin, % 8.1% 14.1%   11.2% 10.6%  
Adjusted operating profit 5.3 10.5 -49.9% 31.2 35.9 -13.1%
Adjusted operating profit margin, % 7.2% 14.2%   11.1% 12.1%  
Profit before tax 6.2 9.9 -37.7% 32.2 26.6 21.0%
Capital expenditure 0.9 1.1 -14.5% 1.3 8.5 -84.5%
User acquisition cost 23.3 15.9 46.3% 78.6 69.6 12.9%
Return on equity (ROE), % 21.5% 23.4%   21.5% 23.4%  
Net gearing ratio, % -75.3% -62.9%   -75.3% -62.9%  
Equity ratio, % 83.7% 77.9%   83.7% 77.9%  
Earnings per share, EUR 0.05 0.10 -46.7% 0.31 0.27 14.1%
Earnings per share, diluted EUR 0.05 0.10 -45.9% 0.31 0.27 15.1%
Net cash flows from operating activities 19.2 5.8 229.5% 42.6 59.6 -28.5%
Employees (average for the period) 401 397 1.0% 388 416 -6.7%

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 dominated in-app-purchases in United States and global ad network sales.

Dividend proposal The parent company's distributable funds amount to EUR 158,924,820.16, of which the profit for the period is EUR 26,105,301.07. The Board of Directors proposes to the Annual General Meeting to be held on April 9, 2019 that a dividend of EUR 0.09 per share be paid (EUR 0.09 for 2017). Based on the number of shares outstanding as of the balance sheet date, December 31, 2018, the total amount of the dividend is EUR 7,096,707.45.

Kati Levoranta, CEO: Rovio's Q4 2018 ended with record gross bookings of EUR 66.7 million for Games in the last quarter as well as record gross bookings for Angry Birds 2 with an impressive 77% year-on-year growth. The year 2018 was characterised by continuously improving our live games and optimizing user acquisition. Our games monetization improved during the full year and both the average revenue per daily active user (ARPDAU) and monthly average revenue per paying user (MARPPU) reached a new high.

In the full year 2018, Games grew 1% year-on-year on the back of the existing game portfolio and 4% in comparable currencies. We also invested a record amount in user acquisition during the year thanks to the strong performance of Angry Birds 2.

In 2018, the Brand Licensing business focused on building the licensing program for the Angry Birds Movie sequel in 2019. The revenues of brand licensing fell as expected from the previous year due to the large revenue peak from the first Angry Birds Movie in 2017.

Although there were no new game launches in 2018 and we increased user acquisition investments, Rovio achieved a healthy operating profit margin of 11.1%. Rovio's cash flow continued to be strong and cash flow from operations was EUR 42.6 million for the full year.

I want to thank all Rovians for their continuous effort in improving our business performance in highly competitive markets.

In November 2018, Rovio acquired the Finnish mobile strategy game developer PlayRaven. Strategy games is one of the largest genres in mobile games and by joining forces with PlayRaven's talented and skilled personnel Rovio strengthens its know-how and can accelerate its expansion into strategy games.

The year 2019 marks the 10th anniversary of Angry Birds and we are this year aiming to launch at least two new games. One game, our new casual puzzle game Angry Birds Dream Blast was already launched on January 24th, 2019. The game has had a good initial performance, comparable to Angry Birds Match, although we are still ramping up user acquisition.

Our next game launch is likely to take place in the second half of the year. We have strengthened our new games pipeline which consists of 13 new games in development for 2019-2021, of which one is in soft launch. We are naturally also excited for the premier of the Angry Birds Movie sequel in August and expect the movie and surrounding marketing to boost our licensing business as well as drive users to our Angry Birds games towards the end of 2019.

To accelerate its growth, Hatch Entertainment, Rovio's 80% owned subsidiary developing a game streaming service, is seeking external funding and further strategic partnerships. Hence, Rovio is prepared to reduce its ownership in Hatch Entertainment below 50%.

In February 2019, Hatch announced a strategic partnership with Japanese mobile teleoperator NTT DoCoMo. The collaboration aims to bring the 5G cloud gaming to Japan, the third largest mobile gaming market. As part of the strategic partnership, NTT DoCoMo Ventures made an investment into Hatch in the form of a convertible note where the conversion is dependent on the total external funding round.

Outlook for 2019 In 2019, Rovio expects group revenues to grow to EUR 300 - 330 million and adjusted operating profit margin between 9 and 11 per cent.

Basis for outlook In 2019, Rovio Games business continues developing its live game portfolio according to the Games as a Service strategy, profitable user acquisition and development of new games. Target is to launch at least two new games in 2019 (the first one, Angry Birds Dream Blast, was launched on January 24th). The expected timing of the second launch is during the second half of the year.

The user acquisition investments are expected to be around 30 percent of Games revenues for the full year with payback target of 12 months. The amount of user acquisition may vary depending on development of the games' monetization, timing of new game launches and the level of competition in the market.

The Brand Licensing segment revenues are expected grow in 2019 with focus on the second half of the year when the Angry Birds Movie sequel is scheduled for release.

The first half of 2019 is expected to have revenues at a similar level or slightly better than the last half of 2018 while the profit is less than the average for the whole year of 2019. Overall, the largest revenue growth and profit contribution is expected from the second half of 2019. The profit margin excluding Hatch Entertainment is expected to be between 12 and 14 per cent.

Briefing and webcast: Rovio will host an English language webcast on the 2018 fourth quarter and full year financial results, including the Q&A session for investors, media and institutional investors at 14:00-15:00 EET on 14.2.2019. The webcast can be viewed live at: http://www.rovio.com/investors-investor-calendar , and later on the same day as a recording.

ROVIO ENTERTAINMENT CORPORATION Mikko Setälä, EVP Investor Relations

More information: CEO, Kati Levoranta, tel. +358 207 888 300 CFO, René Lindell, tel. +358 207 888 300 EVP, Investor Relations, Mikko Setälä, tel. +358 400 607 437, mikko.setala@rovio.com

Distribution: Nasdaq Helsinki Ltd Key media www.rovio.com

About Rovio: Rovio Entertainment Corporation is a global, games-first entertainment company that creates, develops and publishes mobile games which have been downloaded over 4 billion times. The Company 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 and consumer products in brand licensing. Today the Company offers multiple mobile games, animations and has produced The Angry Birds Movie, which opened number one in theaters in 50 countries, and the sequel to which is set for theatrical release in 2019. Rovio is headquartered in Finland and the Company's shares are listed on the main list of the NASDAQ Helsinki stock exchange with the trading code ROVIO. ( www.rovio.com )

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