Flash comment: Takeaways from Q4 mid-quarter analyst meeting - Nordea

We attended Rovio’s Q4 mid-quarter meeting on Friday hosted by IR Timo Rahkonen. The message conveyed by the company provided no real surprises relative to our estimates and daily app store ranking data from data.ai. Broadly speaking, Rovio’s key live games seem to be continuing their solid performance, which left us comfortable with our Q4 forecast of 1% q/q growth in Games revenue whereas UA for Q4 is tracking towards the mid-point of the guidance for 28-33% of Games revenue (Nordea: 30.9%), marking an uptick to the Q3 level of 28.7% mainly due to seasonality. Softness in the overall market has continued, with data from data.ai pointing to a 9% y/y decline in the mobile gaming market globally (excl. China) and to an 11% y/y decline in the US in October-November. Comparing the first two months of Q4 to the last two months of Q3, the market declined by 3% globally and grew by 1% in the US, which points to some signs of stabilization. Relative to post-Q3 Infront consensus, our Q4 estimates are in line on revenue, but our adjusted EBIT forecast of EUR 4.9m is below consensus of EUR 7.1m. We believe the deviation could be a result of higher assumptions for Q4 UA and opex from new studio openings. While these two factors present near-term margin pressure, we view them as important for building larger scale for the future. For 2023, we are 1% ahead of consensus on revenue and 2% ahead on adjusted EBIT.