Rovio: Takeaways from Q3 mid-quarter analyst meeting - Nordea

We attended Rovio’s Q3 mid-quarter meeting for sell-side analysts on Friday hosted by IR Minna Eloranta, CEO Alexandre Pelletier-Normand, CFO René Lindell and Head of Strategy Timo Rahkonen. In terms of Q3 performance, we were left with the impression Games revenue should achieve q/q organic growth, which is in line with our estimates. However, the recently acquired Ruby Games has been consolidated from the beginning of September (we have modelled from Q4 onwards), which provides upside for our estimates, especially given the flying start for the recent Forensic Master game launch. Additionally, Rovio announced a formation of a new game studio in Toronto, which will focus on F2P casual mobile games and be led by Julie Beaugrand, who most recently led Gameloft’s North American Studios and shares a mutual background with Rovio’s key management team members. Furthermore, it seems to us that Rovio’s attempt to exploit the recent US court ruling that ordered Apple to allow links to external payment options in apps would be a single sign-on fidelity platform where the most loyal players could acquire virtual currency and deploy it across the game portfolio. Although we find the ruling and the overall pressure on Apple and Google to lower their 30% platform fees as positive for Rovio and mobile gaming companies, we find it likely that lower platform costs would be at least partly passed on to consumers via lower prices or to be directed towards UA, hence limiting the margin upside.

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