Rovio: Solid Q3 report and additional colour on the game pipeline - Nordea

Rovio reported Q3 revenue 2% ahead of Infront consensus while adjusted EBIT exceeded consensus by 17%. Games gross bookings grew -7.2% y/y organically (-6.5% in Q2). The top-line beat was partly driven by FX, but also by strong performance by ABDB, which also contributed to high operating leverage. UA costs for Q3 were 21.3m (Nordea: 21.5m) at 28.7% of Games revenue after 27.5% in Q2 22 and 26.4% in Q3 21. Guidance for 2022 was slightly revised to reflect the FX tailwinds from the strong USD: Rovio expects revenue to be significantly higher and revenue in comparable FX somewhat higher y/y (previously strong top-line growth, consensus +11%) and lower adjusted EBIT (intact, consensus -10%) for 2022 y/y. UA costs for Q4 were guided to be 28-33% of Games revenue (new / Nordea: 28.8%), which signals a q/q uptick and solid KPIs for key games such as ABDB and AB2, we believe. The company is also opening a new studio in Barcelona. Additionally, Rovio provided more transparency to its development pipeline of 10 games, which looks promising although we believe to new global launches should be expected for Q4. At first take, we expect 2022 top-line estimates for consensus to increase slightly while EBIT should remain broadly unchanged due to the UA ramp up for Q4. Initially for 2023, we expect consensus to move up somewhat for both top-line and EBIT given that KPIs for key games seem to justify incremental investment at the moment.