Rovio: Q2 numbers soft on revenue and in line on EBIT; Q3 UA guidance of 25-30% lower than we had expected - Nordea

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.

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