Angry Birds maker Rovio swings to surprise loss

Rovio Entertainment Oyj (ROVIO.HE) on Wednesday swung to an unexpected fourth-quarter net loss as it spent more on trying to attract new players while being hit by costs from its cloud-based game-streaming service.

The company behind the Angry Birds mobile-gaming franchise said it swung to a net loss of 0.7 million euros ($0.76 million) in the quarter from a profit of EUR4.3 million in the same period last year, as revenue slipped 1.5% to EUR71.6 million.

A FactSet analysts’ forecast had expected net profit of EUR1.1 million on revenue of EUR79.2 million.

User acquisition investments, the cost of advertising and marketing to attract players, rose 18% in the quarter to EUR27.5 million, as the company pushed its Angry Birds Dream Blast and Sugar Blast games.

"During the end of the year we scaled down user acquisition investments significantly as the returns on those investments were not meeting our payback model expectations," said Chief Executive Kati Levoranta.

"Our user acquisition investments in the beginning of 2020 are at much lower level than during 3Q and 4Q last year," she said.

Daily active users of its games in the quarter fell to 5.9 million from 7.0 million while total gross bookings edged higher to EUR67.0 million from EUR66.7 million. Gross bookings represent in-app purchases and in-app advertising sales.

Rovio has now decided to end the financing round at its 80%-owned cloud-based game streaming service Hatch Entertainment amid intensified competition and slower than expected rollout of 5G networks and devices.

Hatch will now focus on Hatch Kids, a subscription and streaming based digital entertainment-and-edutainment service for children and families and will target annualized cost savings of EUR6 million.

The Finnish developer expects to launch between one and three new games during 2020, but the timing of new game launches depends on the games progress in soft launch, therefore Rovio said it won’t give full year 2020 revenue guidance.

However, it expects adjusted operating profit to improve.

Rovio maintained its full-year dividend at EUR0.09.

Write to Dominic Chopping at [email protected]

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