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Edited Transcript of IPO-RVEY.N earnings conference call or presentation 8-Aug-19 11:00am GMT

Q2 2019 Rovio Entertainment Oyj Earnings Call

ESPOO Aug 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Rovio Entertainment Oyj earnings conference call or presentation Thursday, August 8, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kati Levoranta

Rovio Entertainment Oyj - CEO & Interim Head of Games

* Mikko Setälä

Rovio Entertainment Oyj - EVP of IR

* René Lindell

Rovio Entertainment Oyj - CFO

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Conference Call Participants

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* Matti Riikonen

Carnegie Investment Bank AB, Research Division - Financial Analyst

* Richard Farneman

Danske Bank Markets Equity Research - Analyst

* Veikkopekka Silvasti

Nordea Markets, Research Division - Assistant Analyst

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Presentation

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Mikko Setälä, Rovio Entertainment Oyj - EVP of IR [1]

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(technical difficulty)

Today, we are going to (inaudible) and with me here is the CEO -- Rovio's CEO, Kati Levoranta; and CFO, René Lindell.

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René Lindell, Rovio Entertainment Oyj - CFO [2]

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Good afternoon.

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Mikko Setälä, Rovio Entertainment Oyj - EVP of IR [3]

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After the presentation, we will host a Q and A session. (Operator Instructions)

But without further ado, Kati, how did the second quarter go?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [4]

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Thanks, Nina. Welcome, everyone, also on my behalf to Rovio's First Half 2019 Interim Report Audio Cast.

Let's first take a look at some of the key things about Q2.

In summary, our revenues were stable year-on-year. Angry Birds Dream Blast, which was launched in January, continues to grow and reached EUR 14 million gross bookings. There has been a nice traction around the game, and at the end of Q2, the gross bookings of Dream Blast were trending towards EUR 50 million for the full year 2019. The gross bookings for Angry Birds 2 were somewhat lower than in Q2 2018, and the reason for this was the optimization of our user acquisition investments across the key game, which is our usual way of operating.

And looking at the monetization KPIs during the Q2, our average revenue per daily active user and monthly average revenue per paying user, both improved. Our adjusted EBIT margin was 7.4% in Q2, i.e., a bit lower than a year ago. However, this was expected as explained already in our basis for outlook. In general, during the Q2, especially Brand Licensing was very focused on preparing for the Angry Birds Movie 2 launch. And in games theme, we have been working on movie-related events and have integrated them in our top Angry Birds games.

Then moving on to look at revenue and profitability during Q2. I have already said, our revenue was stable year-on-year and was EUR 71.8 million. Games revenue, shown in the red pillar, was EUR 65.4 million in Q2, representing slight growth year-on-year. As already discussed, Angry Birds Dream Blast performed well, and it has been offsetting the expected decline of our older games portfolio.

Brand Licensing revenue, shown in the black pillar, declined 2%. This was mainly due to slower start for the consumer product as revenue streams from old license contracts are declining and new contracts are starting to be activated for the

Angry Birds Movie 2 launch.

And then looking at the profitability. Our adjusted operating profit was EUR 5.3 million in Q2, and the adjusted operating margin was 7.4%. The games adjusted operating profit was EUR 9.5 million and up -- higher when compared to Q2 2018. The main reason for this was the somewhat lower user acquisition investment, which René will discuss with more detail a bit later.

Brand Licensing adjusted operating profit was EUR 0.6 million, while in Q2 2018, it was EUR 1 million. So some decline there due to the different revenue mix than we had in Q2 of 2018. However, the decline was mainly attributed to Hatch Entertainment expansion to new markets along the 5G rollout as the marketing expenses related to app and this is reported in the other segment, shown in gray in the picture.

Then turning to first half. In revenue side, our revenue grew 3.8% year-on-year and was EUR 142.6 million. Games revenue was EUR 131.7 million, representing 7.8% growth year-on-year. Key contributor for the growth has been Angry Birds Dream Blast, which continues to show good performance.

Brand Licensing declined 28.7% year-on-year, and this was expected as Consumer Products have been focusing on preparations for the sequel launch and content licensing revenues, which consist mostly revenues from the first Angry Birds Movie are declining as this is very difficult [wait] for the movie industry and how it works.

And then turning to profitability. Our adjusted operating profit was EUR 12.8 million, and the adjusted operating margin 9%. Decline in group level was due to the decline in Brand Licensing unit and other segments' adjusted operating profit. In Brand Licensing unit, the decline was due to lower revenues in first half 2019 compared to first half 2018. And in the other segment decline was attributed mainly to Hatch Entertainment expansion to new markets and costs related to that.

On the other hand, games adjusted operating profit, shown in the red pillar, grew year-on-year and was EUR 19.6 million, regardless of an increase in the user acquisition investments during first half 2019 compared to first half 2018.

And then over to René for a more detailed information about the game-specific performance.

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René Lindell, Rovio Entertainment Oyj - CFO [5]

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Thank you, Kati. Let's move on to the gross bookings of our games portfolio. The gross bookings in Q2 were EUR 65.2 million and grew 0.6% year-on-year. Angry Birds still continued to be the largest game in our portfolio with EUR 26.1 million gross bookings. This was lower year-on-year, as Kati mentioned, due to lower user acquisition investments for the game during the first half of this year.

And this is quite normal that games fluctuate over the quarters, over its lifetime and sometimes games mature during its newest lifetime. However, the game team is preparing serious events and features, which take in the batch, both opportunity given by the Angry Birds 2 Movie and also overall, seek to improve the retention and monetization of the game. And these improvements and the visibility of the movie, we hope, enables to increase the UA for the second half of the game for Angry Birds 2.

Over the last few weeks, we have seen growth in active users for Angry Birds 2, especially coming through the organic downloads. Angry Birds Dream Blast continued to grow in the quarter and it's now clearly Rovio's second largest game, which reached EUR 14 million in gross bookings. And during the quarter, it showed some growth trajectory as well, which means that we see the game trending towards EUR 50 million gross bookings for the full year.

This is a really great achievement for this new and innovative battle game that we are able to scale up in a pretty short time. Other games, such as Friends, Match and POP, declined somewhat year-on-year, and especially other games category, which includes our older games that we don't maintain effectively and for which we don't do user acquisition investments any further.

Looking at the UA investments in the quarter, which were EUR 21.3 million. These acquisitions and that include -- was 32.6% of the games revenues. As said, this was a bit lower than we had expected because we used less investments in Angry Birds 2, and Angry Birds Dream Blast was the game that received the largest UA investment that -- in the growth phase. And this was also like this for both of the quarters and the full half year.

We still aim to increase the UA from this level in the second half of the year and to enable this asset, we need to improve both key games, the core performance as well as optimize the [UA] across channels and take advantage of the Angry Birds Movie and associated media visibility over this fall.

Our overall UA spend, which is now trending between 30% and 35%, much this will depend a lot on the timing and the size of our second global game launch for the year, as we have stated earlier.

Next, let's look at our games key performance indicators. Starting with the active user base. The daily active users for the top 5 games were slightly lower than in the previous quarter, but very close to the similar level. Active user base for a total portfolio declined as expected due to the older and less actively maintained games. Monthly unique payers were a bit lower in this quarter, mostly due to the lower amount of users of Angry Birds 2.

Overall, operating gains at a lower active user level is a consequence of the -- our targeted user acquisition. It's also good to know that our top 5 games that makes about 90% of gross bookings have 50% of the user base. So this has also defined targeting our user acquisition to the top games.

Monetization, we saw an improvement in -- basically, you could say, all games over this period. The top games having a similar level as in previous quarters. And then when we look at the monthly average of an unique payer with [statistics] seen at EUR 40 for this quarter, and that is something that we are quite happy about that -- and shows that we are able to target our user acquisition and improve monetization. And this is also true that our newer games are monetizing better than the older portfolio.

A few words about cash flow. Operating cash flow in the quarter was EUR 4.8 million, a little bit higher than the previous quarter and overall in line what we expected. Cash balance at the end of the quarter amounted to EUR 124.6 million, and during this quarter, we paid $7.1 million in dividend.

Our full year outlook remains unchanged, but we expect Rovio's Group revenue to grow to be between $300 million and $330 million and adjusted operating profit margin to be between 9% and 11%.

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [6]

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Thanks, René. Let's then move to look at strategy, which remains the same. Our strategy consists of 4 pillars: growing our games business, which is very much our core; growing the Angry Birds brand and the licensing business around it; and seeking growth through M&A and exploring the future of gaming.

In games, we continue prioritizing the top live games when it comes to allocation of user acquisition investments and resources. To ensure a healthy pipeline of new games, we have put more effort in new game development and currently majority of our game developers are working on new games. It is very difficult for games business that not all game projects will go all the way to the game release, some projects are failed along the way and new ones are starting. Thus there is always fluctuation in a number of ongoing projects.

Looking at the games roadmap a little bit. Currently, we have 11 games in different phases of development, and our aim is to launch at least 1 new game still during this year. Out of these 11 games, 3; mainly Angry Birds POP 2, Sugar Blast and World Quest! are in the front right now. And maybe we'll take a brief look at how each of these games look like.

First, Angry Birds POP 2. This is our take for the new generation of Bubble Shooter games with a character-collection element and deeper meta-game. This brings novelty to the genres, and at the moment, we're seeing good signals and potential and are now working on monetization.

Sugar Blast has been developed pretty fast on Dream Blast proven game mechanic. It was specifically designed to target a totally different audience than Dream Blast for it's similar gameplay. And as of today, the results look quite promising.

And then World Quest!, the third game in soft launch. It's an interesting one, really interesting one because it is offering something novel to the market. I mean, it's also slightly different to what we have been releasing in the last few years.

Going more towards the mid-core segment, while keeping the game very accessible. Prior to launch, we're learning a lot of things about this segment, and our team is very agile and iterate fast. And as a result, the game is progressing steadily. We actually -- many times are asked about how does our portfolio look like from an IP perspective i.e., how much Angry Birds games we have versus other IP games. And as you can see here as well, our portfolio is pretty balanced between these 2 things.

Then moving on to brand and Brand Licensing. With regards to that second pillar of strategy, we are living extremely thrilling and exciting time. Angry Birds Movie 2 is rolling out worldwide as we speak and marketing of the movie is becoming more and more visible. We expect the move and the surrounding marketing to give boost to our growth in our product licensing business as well as drive users to our Angry Birds game during the second half.

In M&A, we continue screening potential targets with the focus on free-to-play mobile gaming companies, which can either help us to strengthen the genres, our studios are already working on or help us to expand the new genres if we see this mix from the strategic perspective and market perspective. Example of these activities is PlayRaven that we acquired in Q4 2018. The team -- PlayRaven team is focusing on developing a strategy game and working towards soft launching the game still this year.

In the fourth pillar, future of gaming, we have been exploring many things and also invested, for example, in artificial intelligence and machine learning, which we believe will play a big role in game development going forward. One of our future of gaming strategy and investment is also Hatch. Hatch Entertainment is Rovio's 80%-owned subsidiary, developing a mobile game streaming service for mass audiences. Hatch has already several partnership agreements with leading teleoperators, like NTT DoCoMo and Sprint. During the second quarter, Hatch continued to execute upon its go-to-market strategy and concluded partnership agreements with Samsung and Vodafone U.K., Spain and Italy. Hatch is currently available in Japan, South Korea, U.S. and many European countries on Android. To accelerate its growth, Hatch continues to seek external funding and further strategic partnerships. And in this context, Rovio is prepared to reduce its ownership of Hatch below 50%.

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Mikko Setälä, Rovio Entertainment Oyj - EVP of IR [7]

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Thank you, Kati, and thank you, René. We are now ready to move on to Q&A session.

(inaudible) shown on the webcast screen, we ask you to present your question in English.

Operator, we are now ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Matti Riikonen from Carnegie.

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Matti Riikonen, Carnegie Investment Bank AB, Research Division - Financial Analyst [2]

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It's Matti Riikonen, Carnegie. A couple of questions. First of all, when you mentioned that the PlayRaven game in soft launch, is that among those 2 that you mentioned to be in soft launch for the whole group? So basically, do you treat them as a separate unit? Or are you talking about Rovio's 2 soft launch -- or 3 soft launch games with -- including the PlayRaven 1? That's my first.

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Mikko Setälä, Rovio Entertainment Oyj - EVP of IR [3]

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PlayRaven is not included in that one. So those 3 that we mentioned are already in soft launch, and the PlayRaven team is working on getting the game in the soft launch still during this year. But the answer is -- short answer is, no. PlayRaven is not among those 3.

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Matti Riikonen, Carnegie Investment Bank AB, Research Division - Financial Analyst [4]

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Okay, good. Then regarding the Hatch financing round, I think you started to talk about that already in Q1, and we still haven't heard any progress. Could you give some more flavor how you're proceeding with the negotiations? Have you met a lot of investors? What's the kind of general output or feelings about? Or are there any kind of touch points, which kind of requires more work from your side or the decision-maker side on the other side? So where are we going at the moment, should we expect that it's fairly close? Or is it that we should wait until the whole year that something happens?

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Mikko Setälä, Rovio Entertainment Oyj - EVP of IR [5]

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Our financing round is ongoing, and we have discussions with several different parties at the moment. And I mean, as always, with these kind of projects, they have their own careful process and information can, unfortunately, only be shared once we are at such stage that it can actually be spoken publicly, so it is that status at the moment.

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Matti Riikonen, Carnegie Investment Bank AB, Research Division - Financial Analyst [6]

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All right. Then finally, regarding the user acquisition investment tactics. You mentioned in the report that you were not able to use user acquisition as much as you wanted because the 12-month payback requirement was kind of preventing you to do so. Should we read it like so that the price of user acquisition is still relatively high and then it doesn't allow you to make as much investments as you wanted? Or is it so that you want to save UA funds for the second half when you also get boost from the movie. And then the bang for the buck, so to say, would be more efficient in the second half. So -- a little bit more clarity on that would be nice.

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René Lindell, Rovio Entertainment Oyj - CFO [7]

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Yes. Thank you for the question. So we have not basically saved kind of fuel for the second half. So that's not the reason we invested less in Q2. As said, we had planned to invest more. And we do follow the payback [time] that we have and the requirements for each game. And what typically happens is that you have a dynamic within, not just the cost principles, as you said, it's not simple as cost principles. Generally, it would be rising across the portfolio or in the market, but it's more -- it's a game-specific thing when you have -- each game has its own UA, you could say, plan, what type of users you're targeting? And also the other hand or side of the coin, what the performance of those users you're getting in? And when you optimize those 2, then in that perspective, we had a situation where basically, we couldn't invest as much as we had hoped for. So that's pretty much the normal optimization as we have done every quarter.

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Matti Riikonen, Carnegie Investment Bank AB, Research Division - Financial Analyst [8]

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Okay. Then finally, the kind of huge acquisition spend between Angry Birds 2 and then the Dream Blast, are you kind of -- because Dream Blast is still in a growth phase and Angry Birds 2 is kind of a mature game, of course, it has been growing also in previous quarters. But are you kind of putting more money into the second largest game just because you want to maximize the potential in the second half? And at least for the time being, that means that less money is put on the Angry Birds 2, and you can basically revisit the investments in AB 2 at the later stage when you have kind of experimented the potential enough in the second largest game. So how does your thinking go in that line? Or is it just the absolute return that always determines the size of UA that you are putting in?

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René Lindell, Rovio Entertainment Oyj - CFO [9]

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Thank you. It's not always necessarily absolute return, but that is the main guiding light. And as we saw AB 2 scaling up really, really good last year and actually over the last 2 years, I think we reached a certain level of maturity in the UA and Hatch. AB Dream Blast is a new game coming into the market with a -- very different mechanics, different audience. We saw an additive growth in there and -- which is on -- in a way not cannibalizing on the other games in the portfolio. They both have been -- will grow and step up the UA as those games performance had warranted. So I think Dream Blast, whether it can continue scaling, we hope it can, but you never know when you're going to reach that level that now with these features, this monetization, this attention and this kind of UA strategy, at what point do you reach the ceiling and you need to basically go and innovate all parts. And of course, experimentation happens volatile in both the game and the marketing [poor] for both case. So in that perspective, it hasn't been a choice of ramping up one in expense of the other, but both of our games, we would like to see grow over in the future.

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Operator [10]

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Our next question comes from the line of Veikko Silvasti from Nordea.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [11]

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It's Veikko Silvasti from Nordea Markets. The first question is regarding the content licensing revenue that was strong during Q2. And most of the revenue came from the first AB movie. Is this run rate of around EUR 5 million going to last in the future?

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René Lindell, Rovio Entertainment Oyj - CFO [12]

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Yes. Thank you. Basically, the -- how the movie revenues score, of course, is that over time they do decline, in a declining profile, as we have said many times over, and that is the basic assumption. Now there can be fluctuations over time and over quarters that we see. As I said earlier, we've seen some of that growth in the revenue stream from the first movie versus previous quarter. We still -- we think that it's not a general trend. And what -- if there would be growth opportunities, those would mostly related to kind of the boost driven by the second movie's visibility, which would mean that the first movie is shown more in different channels, and that kind of could have at least some boost around the timing of the second movie's release, but this is not the case that we see yet here. So we still have to see how the first movie reacts to the second movie's release.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [13]

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Okay. And then another question regarding the employee expenses of games segment that grew around 40% quarter-on-quarter. So what's driving this and will it last?

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René Lindell, Rovio Entertainment Oyj - CFO [14]

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Yes. I think if you look at the employee expenses quarter by quarter, you have a couple of effects there. One is the -- of course, total headcount. That's one thing to follow and if headcount increases, then you would have kind of a general, of course, increase in personal expenses. And we have increased headcount in games per our strategy of having more games in the pipeline. We have more live games, and we are putting more effort into new games portfolio as well as we see now already results of having 3 games in a soft launch and have a very good traction there. So we're seeing kind of our return already on those investments we made.

And the second piece that, that you can have a few items that can fluctuate over time. One is bonus payments and bonus provisions, and those give a kind of fluctuation quarter by quarter. And so that is maybe something you can also see here.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [15]

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Okay. And then maybe finally, if you could give some more color on the game-specific KPIs. So we see quite large quarter-on-quarter decrease in Angry Birds 2 of 17%. And also, you mentioned that the user acquisition expenses have come down for Angry Birds 2. Does this mean that the retention rates are going down and Angry Birds 2 is not performing as well KPI-wise as previously? And do we expect the Angry Birds Movie 2 to actually help the retention rates in longer term?

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René Lindell, Rovio Entertainment Oyj - CFO [16]

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Thanks. So I think, overall, I mean if you would -- if you look at the last year, how much we spent in UA, in AB 2, which was most of our spend. So that means that we ran with quite a lot daily active user base. And then from first quarter, we used less UAs, so we had less new users coming in. And then you would see a quite normal decline in daily active users. And that's basically impacting over time, and we see the biggest impact now in the second quarter. And -- so it's not -- and it's mainly not a retention issue, it's more of a user flow. So the retention case, those can be exactly the same, but then you have a different daily new active user or daily new user inflow, which raised to this dynamic and it's not -- then the UA is not just dependent on retention, of course, it's dependent also on the monetization, so both sides can -- need to be optimized to restart the UA at a bigger scale that we have now. And of course, the move is something that we think will have an impact or scalability not just for UA perspective, but also on the organic users, the users that come in outside the UA channels and where we don't basically have the same payback time requirements, but it's basically given by the visibility and -- of the whole brand during this event.

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Operator [17]

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(Operator Instructions) Our next question comes from the line of Richard Farneman from Danske Bank.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [18]

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It's Richard from Danske. You say that the Angry Birds Dream Blast is trending towards EUR 50 million for the full year of 2019. Could you give us a little bit more color on this? And does this mean, it won't grow much from the EUR 14 million that you have now in Q2? Because if you add EUR 14 million, EUR 14 million, EUR 14 million and then with the EUR 7 million in Q1, we would reach around EUR 50 million. How do you see the growth in Angry Birds Dream Blast, please?

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René Lindell, Rovio Entertainment Oyj - CFO [19]

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Thank you, Richard. I think it's a pretty good question. This is a coverage run rate that we see at the moment. So of course, this doesn't rule out that it wouldn't be possible to scale up or grow the game. But looking at where we are at this point of time, then this trending towards EUR 50 million is where we stand. And naturally, the game is -- game continues to innovate coming with new features to the game. It's also having events related with the movie, so the target is naturally that we wish to grow the game further and exceed this, but at the moment as a trend, EUR 50 million is where are -- we have been heading over the last few months and still this is quite a good achievement compared to where we had expectations earlier.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [20]

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Okay. So with the $50 million, you don't actually take into account any positive effects from the movie, for example? Or is just everything else equal.

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René Lindell, Rovio Entertainment Oyj - CFO [21]

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Exactly.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [22]

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Okay. And then to user acquisitions. You said you expect a higher user acquisition in H2, and could you specify a little bit how you see the difference between quarters. I mean, the movie is out now in Q3, and Q4 will be a holiday season. So how do you see the different quarters in UA spending?

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René Lindell, Rovio Entertainment Oyj - CFO [23]

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I think in Q3, you can have a few dynamics there. And one thing that you typically hope to see when you have a big visibility given by -- beginning for the brand or outside the normal UA, but the UA becomes more effective. When it becomes effective, you can actually scale up more, then you can -- you would actually use more UA. At the same time, meaning that we have more organic users, those kind of have their old path though, even if you're getting more users without UA the same time, if you had to become more effective, you invest more in that. So that basically, I think what I was seeing in Q3. And Q4 is an interesting one because we hope, of course, that movie visibility continues to flow into that quarter as well. And we have activities planned, of course, for the 2 games and there's lot of other, let's say, holiday season has major weekends that we typically use for the events. However, sometimes, we feel also that user acquisition and prices for advertising -- in digital advertising can go up towards end of the year. And that means that you get lower returns. So we also see that sometimes you have to kind of pull back on the UA at the year-end and restart again the next year. So we'll have to see how the dynamics go when it -- but it depends really on also the competition in game launches as we've seen in the history as well.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [24]

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Okay. You guided, I think, was it 30% to 35% for the full year? Is it going to be -- could you give a little bit more color on this. Will it be further towards 35% or 30% same?

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René Lindell, Rovio Entertainment Oyj - CFO [25]

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That's going to be really hard to say. I think that's why there's a range between where we see it going now. And as I said earlier, it really depends on the second game launch as well that what's the timing of that in the second half of the year. So if we launch it earlier, then we might go higher for the full year a bit later, then it might be on a lower level.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [26]

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Okay. Jumping to the movie. How much revenue are you expecting now in Q3 from the movie? And with that, I mean when will Sony actually start paying their first royalties to you?

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René Lindell, Rovio Entertainment Oyj - CFO [27]

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Yes. So typically, the royalty payments come with some sort of lag. So we are -- Sony will receive their financials from the -- globally for many markets collect that to report and then we'll receive the report and then the money a short while after that. So there is a time lag between actual cash flow. But from revenue bookings perspective, the box office bookings will start in Q3. So we expect the booking already end of Q3, the first revenue. So the movie that we expect to get and continue that month by month. And basically, when the reports arrive, we will confirm that and continue for that. That's the same process as for the first movie as well that the reports come with the lag and then you have an approval, and that's basically how the whole licensing business as well works.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [28]

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Could you, at all, specify how much royalties you are getting, like percent-wise?

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René Lindell, Rovio Entertainment Oyj - CFO [29]

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That is unfortunately something we can't disclose. But this is a -- first time it was more of a license deal. So you can from there convey that it's a much more kind of share of revenues than what we had, that we will get, which, of course, we're hoping different model than where ultimate profit -- profit taken off the first movie. And this is a license model. So yes, some of the revenue can be a bit earlier. I think, it's -- the box office revenues are [published], however, then they are at a much smaller level. But this is all basically baked into our full year outlook as well.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [30]

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Okay. Just a final question. You said that you're going to release a new game now in H2? And I can't remember if you've said it's going to be an Angry Birds or non-Angry Birds IP on this game, but maybe you could argue a little bit that it would be good if it would be in our Angry Birds now with the movie. Could you give us some more color on this what kind of game or which of the soft launches will be the most probably to launch now in H2?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [31]

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Right, and thanks. I mean, yes, we do have these 3 games in soft launch and that's explained, there is an Angry Birds game and there are 2 other -- other IP games as well. But as we all know, the soft launches are the best launches in the sense that we optimize their KPIs, we have set certain targets internally for the KPIs that the game needs to be reached before it's globally launched. So this is -- the process that is ongoing now with those 3 games, and we need to see where we are with each of them and which one is then ultimately released. So that's the situation.

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Operator [32]

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And our next question comes from the line of [Erwin Nelson] from [12 Star Invest].

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Unidentified Analyst, [33]

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Can you hear me?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [34]

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Yes.

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Unidentified Analyst, [35]

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Good. [Erwin Nelson] from [12 Star Invest], Copenhagen, Denmark. Very quick question, balance sheet is very strong. You have over EUR 100 million in cash pile. I know the dynamics of your base in the user acquisitions and also for them, you want to keep something for potential bolt-on acquisition, but you flagged that you acquired the 10% share buyback in the AGM. You haven't exited the market, I can see. What's the plans for doing something with the capital structure?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [36]

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Well, as you said, yes, there are 2 things in our strategy, but the M&A is one of the pillars and in having a cash flow reserve to access, gives us already a little bit of flexibility in this area. UA is the other thing that requires obviously cash, and we are happy that we do have or we're not cash constrained, let's put it that way, when we talk about the UA. But these are the 2 major things obviously that we are looking at going forward as well as per our strategy.

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Unidentified Analyst, [37]

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Yes. But if I can have an add-on question. As I said, I do understand user acquisition dynamics and you're saying acquisition of competitors, bolt-on acquisition, fine. But how much are you targeting for the cash part though because are you going to start to buy back shares?

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René Lindell, Rovio Entertainment Oyj - CFO [38]

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There's no such plan at the moment. So as Kati said, we have a good cash position and our strategy is both to grow games, and let me say, UA investors, and we have plenty of case in our portfolio. And we're also looking at this from a multiple year perspective and other side is the M&A, M&A side, where we are stalking for targets. And it's better to have that forecast ready than not to have it. So at the moment, there is no plan to do any other balance sheet structuring.

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Operator [39]

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And there seem to be no more questions registered at this time. So I'll hand the call back to you speakers for your closing comments.

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Mikko Setälä, Rovio Entertainment Oyj - EVP of IR [40]

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Thank you, operator, and thank you, everyone, for the questions and listening in today. So that concludes our presentation and our Q&A session for today. We wish you all a happy day, and thank you Kati and René for presentation.

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [41]

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Thank you, everyone.

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Operator [42]

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And this now concludes our conference call. Thank you all for attending. You may now disconnect your lines.