Rovio Posts Strong Quarter, Shares Rise

Shares of Finnish game maker Rovio Entertainment Corp. surged as much as 10 percent on Friday after the company’s profits more than doubled in the third quarter.

In the three months to September, the Helsinki-based firm reported adjusted earnings of €10.4 million ($11.80 million), above the €4.0 million generated in the previous year.

The rise in quarterly profit was mainly driven by lower marketing costs and update in Rovio’s most popular game, Angry Birds 2, which brought in a 68 percent boost in gross bookings year-on-year to €30.8 million.

Revenue, on the other hand, fell slightly short from expectations of €71.1 million, as the firm reported overall sales of €71 million in the third quarter. That represented growth of just 0.5 percent from the same period in 2017.

With respect to guidance, Rovio cut its outlook for the rest of 2018. The game developer estimated group revenue within the range of €280 million to €290 million, with profitability expected to be 10 to 11 percent of that figure.

Rovio’s latest forecast was lower than its previous guidance of between €260 million and €300 million, and profits of between 9 to 11 percent.

Rovio’s stock price last stood 11.3 percent higher to €5.00 on Friday.

Easing Angry Birds Dependence

Despite a positive third quarter, Rovio has warned that it would need new games to support further growth.

Rovio Chief Executive Kati Levoranta said it is clear that they need new games to accelerate growth, adding that the company intends to introduce at least two new games in 2019 and had another ten projects being prepared to keep up with tough competition.

Rovio, which listed in Helsinki in September last year, has suffered from its high reliance on the Angry Birds brand, first released in 2009, and strong competition in the smartphone gaming industry.

Shares of the firm experienced a 50 percent loss in February after Rovio forecast that sales could weaken this year, having gained 55 percent revenue growth in 2017.

The company ventured into the film industry with the Angry Birds movie in 2016, which took in around $350 million at the box office and expects a sequel to fuel growth in the business next year.

Rovio has also raised investments in its 80-percent owned subsidiary Hatch, which is expected to become the Netflix of mobile game streaming.  Hatch had now left beta phase and was recently publicly launched in Nordic countries, the UK, and Ireland, according to Rovio.

Analyst Hannu Rauhala said the latest development about Hatch was good news.

Now there are hopes that at some point it will start creating revenue, reducing its current negative impact on profit, Rauhala stated.

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