Rovio: Q1 EBIT in line with consensus; outlook for 2023 reiterated - Nordea

Rovio reported Q1 revenue 2% below Modular Finance consensus and adjusted EBIT bang in line. Compared to our forecasts, revenue was in line and adjusted EBIT was 12% above. Bookings from ABDB exceeded our estimates by 11%, while other games missed our estimates. Games' gross bookings grew by -13.6% y/y organically (Q4: -7.9%; Nordea -11.4%). User acquisition (UA) investments at EUR 23.9m were above our estimate of EUR 23.5m, i.e. 32.3% of Games revenue (Nordea: 31.7%; consensus: 31.8%) compared to 31.3% in Q4 2022 and 38.0% in Q1 2022. Rovio continues to expect 2023 to be a stable year for the mobile gaming market. The company reiterates its guidance for comparable revenue (consensus: 0%) and adjusted EBIT (consensus: +1%) to be flat y/y in 2023. UA costs for Q2 were guided at 27-32% of Games revenue (Nordea: 26.6%). Regarding the Q2 outlook for key games, Rovio states that it is working on a turnaround for AB2 and AB Journey, March was the best month ever for ABDB and AB Friends is witnessing quite stable development. We expect limited consensus revisions on the back of the report. The share price is driven by the recent takeover bid by Sega rather than earnings momentum. We continue to believe that Sega’s EUR 9.25 per share recommended cash offer will go through given the support from the BoD and the shareholder base, implied valuation premium to peers and historical levels and the headwinds faced by the mobile gaming market in the near-term. Given Rovio’s strategy review and discussions with potential suitors ahead of Sega’s bid, we believe a competing offer is unlikely at this point.