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Edited Transcript of IPO-RVEY.N earnings conference call or presentation 30-Oct-19 12:00pm GMT

Q3 2019 Rovio Entertainment Oyj Earnings Call

ESPOO Nov 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Rovio Entertainment Oyj earnings conference call or presentation Wednesday, October 30, 2019 at 12:00:00pm 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

* Minna Eloranta

Rovio Entertainment Oyj - Senior Communications Manager

* 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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Minna Eloranta, Rovio Entertainment Oyj - Senior Communications Manager [1]

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(presentation)

Good morning, good afternoon or evening, depending on where you are. Welcome to Rovio's earnings audio cast.

My name is Minna Eloranta, and I work in Rovio's IR team.

Today, we are going to go through Rovio's third quarter 2019 financial results. And with me here in the studio are Rovio's CEO Kati Levoranta.

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [2]

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Hello.

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Minna Eloranta, Rovio Entertainment Oyj - Senior Communications Manager [3]

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And CFO René Lindell.

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René Lindell, Rovio Entertainment Oyj - CFO [4]

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Hello.

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Minna Eloranta, Rovio Entertainment Oyj - Senior Communications Manager [5]

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

But without further ado, Kati, how did the first quarter go -- sorry, the third quarter? I'm sorry.

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

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Thanks, Minna. And good afternoon also on my behalf, and welcome to our audio cast.

Yes, let's start with going briefly through the third quarter.

So Rovio's group revenue grew 5.4%, and Games revenue grew 5.2% year-on-year. The growth was mainly driven by a strong performance of Angry Birds Dream Blast. It reached EUR 17.8 million gross bookings in Q3, and for full year, the gross bookings are trending towards EUR 60 million. Looking at the annual gross bookings run rate in September for the game, it's tracking close to EUR 80 million. Needless to say we're extremely happy with the performance of Angry Birds Dream Blast. Angry Birds 2 was again our biggest game in Q3, although the gross bookings were lower compared to last year and previous quarter. July was soft for the game, but improvements were seen in August and September.

The adjusted operating profit margin for group in Q3 was 7.2%. This is lower than a year ago but was expected due to increased investments in growth through user acquisition.

Angry Birds Movie 2 was released in August. The sequel opened in a very competitive landscape, and thus the box office has been softer than we expected regardless of very good reviews and audience scores. In September, we launched a new game, Sugar Blast, which we are now gradually ramping up. Due to launch in the latter part of the quarter, it didn't contribute significantly in the third quarter revenues.

So that was the Q3 in a nutshell. And then moving to Q3 financials.

Group revenue in Q3 was EUR 74.8 million. Games revenue was EUR 66.4 million, and Brand Licensing revenue was EUR 8.4 million. Thus, both segments grew in revenues year-on-year. As mentioned earlier, the main revenue growth driver for Games was Angry Birds Dream Blast. For Brand Licensing, the growth came mainly from higher revenues from consumer products.

Group adjusted operating profit was EUR 5.4 million, and the margin was 7.2%. Games adjusted EBIT was EUR 7.2 million and thus declined year-on-year due to increased investments in user acquisition. Brand Licensing adjusted EBIT grew to EUR 3 million as a result of higher revenues when compared to last year, in Q3. The adjusted operating profit of the other segment declined due to higher go-to-market expenses in Hatch.

And then looking at the 3 quarters of this year, we see 4.3% revenue growth year-on-year. Games have grown 7% from EUR 185 million to EUR 198 million. Brand Licensing has declined 16.8% year-on-year. And adjusted operating profit for the first 3 quarters for the group was EUR 18.2 million, and the adjusted EBIT margin was 8.4%. Games adjusted EBIT declined to EUR 26.8 million, and the reason here is again the higher investments in user acquisition. Slight decline in Brand Licensing adjusted EBIT is due to lower revenues in the period. Other segment's adjusted EBIT decline results from the higher go-to-market expenses in Hatch, as already mentioned earlier.

So this is kind of like a snapshot of the financials. And now over to René for a bit more detailed information about the Games performance.

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René Lindell, Rovio Entertainment Oyj - CFO [7]

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Thank you, Kati.

Let's look at the gross bookings of our Games portfolio. In total, the gross bookings grew 3% year-on-year in euro terms. And if we look at comparable currencies, the bookings were stable.

As Kati mentioned, Angry Birds Dream Blast, which was released in January this year, continued to grow and reached EUR 17.8 million in gross bookings, thus growing 27% from Q2 this year. And it reached in the end of the quarter, in September, a EUR 20 million quarterly run rate or close to that, which means nearly EUR 80 million on a yearly level. So this has clearly been the fastest-growing game that Rovio has released in the free-to-play gaming industry. And also, I think this is one of the -- or we see that this is one of the hit games of the year, if we look at all the games released this year in the -- especially in the Western market.

Angry Birds 2 had EUR 1.5 million lower gross bookings in Q3 versus Q2. This was mainly due to a softer July month, which followed a softer June. In August, September, we saw a boost for the game due to the launch of the Angry Birds Movie sequel. And this we saw both in the organic downloads and also in paid user acquisition channels, where we're able to invest a bit more in the game during that time period. The other games in the portfolio declined somewhat during the quarter, and thus although Dream Blast managed to grow very strongly, the total portfolio was stable in this quarter.

The user acquisition for the third quarter was EUR 27.1 million. So this was a record amount for Rovio. Most of the investments were directed to Angry Birds Dream Blast. And also Angry Birds 2 had, during the movie launch period, a bit higher UA level than earlier this year. So the UA was spent mostly to scale up Dream Blast. And we aim to keep a good level of investments in UA for the rest of the year, and thus we estimate 35% to 40% of total Games revenues. Increasing UA investments at this pace and scaling up new games, of course, also impact the short-term profit, as Kati mentioned earlier. Also, it's important to keep in mind that the increase in UA levels in a quarter doesn't immediately translate to a large revenue growth in that same quarter, as the payback is collected gradually over several quarters. And as we said, the payback time overall is about 4 quarters. And also for Dream Blast growth in this quarter, it has to be understood that is benefiting from the investments done from the beginning of the year.

Next, let's look at the game key performance indicators, starting with the active user base. In Q3, both the daily active users and the monthly unique payers grew for the top 5 games. Especially, we saw a large inflow of users for Angry Birds 2 during the movie sequel launch. And we saw that the top 5 games had the highest DAU for the year, 3.8 million. For the older game portfolio, the DAU continue to decline, but we also have a one-off level adjustment as we stopped tracking some of the oldest games' active users due to legacy back-end systems coming offline. This had an impact of approximately 0.6 million one-off impact on the DAU for the whole portfolio. So this is the new level we will continue tracking from in future reporting.

In monetization, we saw that average monetization, especially for the top 5 games, was impacted by the large inflow of organic users during movie launch. This meant that the ARPDAU for top 5 games dropped from EUR 0.18 to EUR 0.16, as we had so many new users coming in organically and not through the paid UA channels which had more targeted users and this is quite normal in these situations. And the ARPDAU for all games grew to EUR 0.12 largely due the fact of the previous slide, where we said we stopped tracking some of the older games in the portfolio. And thus, the top 5 games have an increasingly large role also in this average ARPDAU number.

You can also see in the monthly average revenue per unique payer a slight decline, again, due to the fact that there are a lot of new users in the games, especially Angry Birds 2, that are not as targeted as previously in our paid UA.

A few words on cash flow and cash balance.

The operating cash flow in Q3 was negative of minus EUR 0.7 million, and this was due to 2 things. There was a large increase in working capital during the quarter and a slightly lower profit versus Q3 last year. The cash balance grew to EUR 127.9 million at the end of the quarter from last quarter's EUR 124.6 million. This included EUR 4.5 million of capital that was raised from subscriptions of 2015 option program that ended in July.

Our outlook for this year remains the same as we updated on the 12th of September, when we announced we expect the full year group revenue to grow to EUR 295 million to EUR 310 million and adjusted operating profit margin to be between 5% and 8%.

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [8]

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Thanks, René.

We communicated in September that we are increasing investments in user acquisition and long-term growth. Our core strategy is to grow Games business, and organic growth is our main focus. However, M&A can bring additional growth opportunities as well.

So let's look a bit closer how the Games road map has developed. We discussed about the Angry Birds 2 and Angry Birds Dream Blast already. Both games are currently introducing exciting and engaging Halloween campaigns and events, and more themed content is coming regularly. In September, we launched a new IP game, Sugar Blast. And we have currently 9 games in development, out of which 3 are in soft launch: Angry Birds Pop 2, World Quest and Small Town Murders. Small Town Murders entered into soft launch about 3 weeks ago, so that is our newest game in soft launch. Looking a bit ahead, we are aiming to launch in the first half of 2020 1 to 2 new games. However, it is good to remember that the soft launch is very much about testing, improving and validating the scalability of the game. Only when we are satisfied with the KPIs and are confident that we can grow the game the precise timing for a global launch is decided. Also, external matters like the market situation can impact the launch schedules.

Next, a few words about the recently launched Sugar Blast and the games in soft launch. Let's first look at the Sugar Blast game.

So this is a new IP game and, as said, launched in September. It applies Angry Birds Dream Blast's proven game mechanics, but it is designed to target a totally different audience. The game has now been out less than 2 months. And we have been able to confirm that indeed our assumptions was valid, as the game does attract different type of players, mostly females, compared to Dream Blast. We are in the process of scaling the game gradually as we collect more data about this audience and how the audience behaves.

Then moving on to Angry Birds Pop 2. This is our take on the new generation of bubble shooter games with a character collection element and a deeper meta game. This is actually a good example of why we do soft launch and how we learned to fully take advantage of this process. When the game first hit the market, KPIs were promising but not sufficient to justify a global launch yet. Meantime, the team has kept iterating on the game and listening also, obviously, to what our players were telling us. And now the game and the KPIs have clearly improved.

And then moving on to World Quest. We are getting the right slide. Just a second. So as discussed also last quarter, World Quest is our mid-core yet very accessible idle RPG game. It is in a similar situation then just described for AB pop 2. We are learning a lot during the soft launch phase and the game keeps on improving. However and since this is a different for us -- different type of game that we've been developing earlier and quite innovative on the market as well, we still need to -- a bit more time to keep on improving the game.

And then our latest soft launch, Small Town Murders, which has been out there now about 2 weeks or 3 weeks soon. It's a great puzzle game, as we know how to make them, where players are challenged to solve crimes as they progress through the levels. We are excited by this mix of narrative meta game and puzzle core -- or puzzle action core, but we obviously need more time to see how the game behaves during its soft launch but are very excited to see how things move forward with Small Town Murders.

Then moving on to the brand. As we all know, Angry Birds brand is a strategic advantage for us both in Games and licensing, and we continue building the franchise. However, going forward, our licensing activities are planned to be more focused, as we communicated earlier this month. As mentioned, one of the key events around the Angry Birds brand this year has been the release of the Angry Birds Movie sequel. The movie was released in August, and the rollout has been ongoing during the third quarter. A few bigger markets opened only in this month.

The current box office revenue is a bit over USD 140 million, which is softer than we had expected, as mentioned already earlier, due to the highly competitive landscape of family movies. However, the audience score and the reviews have been very good. So those who have been -- seen the movie have really liked it, and the brand has been able to deliver on its fun and edgy promise again. So from the brand perspective, the movie brought positive visibility to the brand. And we also saw this as an uptick in game downloads, especially in U.S. and for Angry Birds 2 game. When it comes to the financial impact of the movie to Rovio, the sequel is done in a different model, business model, than the first movie was done, and thus the impact for Rovio is also small.

When looking at the future of gaming, we are closely investigating different market signals; and have internally already started to invest, for example, in machine learning and artificial intelligence, i.e., technologies that can quite significantly change the ways how mobile games are, for example, developed and experienced in the future. We have also invested in Hatch, which is Rovio's 80% owned subsidiary, developing a cloud-based game-streaming service for mobile and smart TVs.

Hatch has during this year teamed up with several leading telco operators to continue its market expansion. During Q3, Sprint launched Hatch in its 5G phones in U.S. And Hatch and Samsung broadened their partnership to cover, in addition to South Korea and U.S., also major European markets. Hatch Kids, a safe environment for children to play and learn without ads and in-app purchases, was soft launched also as a stand-alone app in Finland and Sweden. And during 2019, Rovio is exploring alternative financial structures and partnerships to accelerate Hatch's growth, and it's prepared to reduce its ownership below 50%.

And then as a summing up this audiocast session from the presentation perspective, we would like to still remind all of you that we are having a Capital Markets Day in the coming Monday, so November 4, here in Helsinki, where we will have more thorough presentations by Rovio's senior management about our business and the growth strategy. So obviously, please, welcome to join us.

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Minna Eloranta, Rovio Entertainment Oyj - Senior Communications Manager [9]

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Thank you, Kati. And thank you, René.

We are now ready to move on to a Q&A session. (Operator Instructions) 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) Our first question comes from the line of Matti Riikonen of 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. So I was wondering about the film, the second Angry Birds film. You said that it contributed positively to the games, but if we look at the KPIs of the films, it seems that it perhaps increased the playing of your largest games and probably Angry Birds 2 in particular, but it actually didn't increase so much the money that you got from the players. So is this an accurate point of view? And what might be causing that? So is it just that people went on to play the games there, but they were not kind of hooked for a longer time to actually pay for their gaming?

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René Lindell, Rovio Entertainment Oyj - CFO [3]

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Thanks for the question. So I think you're right in that perspective. There was a lot of new players, as we said, to the main games. And especially, Angry Birds 2 is the game that saw a big uptick in downloads during the movie launch period. A big influx of new users, of course, means that the mix is very varied in terms of what kind of users are coming in and not -- let's say the payer mix is also different from what it normally would be, the normal typical organic downloads or then the paid UA, which means there's a little bit less payers, a little bit less monetization. And that also impacts kind of the KPIs, as we've said earlier, that there's less monetization. And of course, over time, we hope that some of these players are hooked and will keep on and become, let's say, regular players of Angry Birds 2 for the long term and deliver revenue over time. Also, in a game like this, it takes some time basically before people start to spending here. It's not even visible in the first few weeks. So we'll have to see that over a bit longer term, how that impacts, but overall I think the good thing is the boost for organic downloads and the boost for the brand that we are seeing for Angry Birds 2 overall.

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

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Okay. And then second question is related to Brand Licensing. So you estimate now that due to the kind of lower sales in the second movie, you estimate cumulatively EUR 5 million lower net sales from -- in content licensing in the next 10 years. And you say that this is a relatively small impact, so is this relatively small impacts compared to your total group sales? Or is this relatively small impact compared to your expectation of what the second movie would actually bring you?

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René Lindell, Rovio Entertainment Oyj - CFO [5]

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Yes, I think it's -- of course, it's relatively small compared to the total group sales and the total group profit. So I think that's clear, that formula revenue reduction over 10 years is quite small on a single-year basis. The overall business case, of course, impact is larger. I mean if we look at now the box office numbers which are currently at $140 million, still growing week by week but clearly lower than the first movie, then of course then it's a quite big change in overall. But as said, that this is a licensing model, it means that the overall case was so much smaller than the first movie that then the impact remains small financially, yes.

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

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Okay. Okay. Maybe a follow-up. So of course, you don't want to say probably what kind of figure you were expecting to receive from the second movie, but just, I mean, EUR 5 million related to the expectation that I think the market has been having is fairly large, so would you kind of confirm that, in relation to your expectation of the Angry Birds second film revenue, that was perhaps a significant number, the EUR 5 million?

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René Lindell, Rovio Entertainment Oyj - CFO [7]

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As said, it's not significant if you compare to the total group revenue such as the company's, so I don't think in any case that EUR 5 million is significant.

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

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No, no, not compared to the total group revenue but compared to the expectation from the second movie specifically.

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René Lindell, Rovio Entertainment Oyj - CFO [9]

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Yes. I think, that, I already mentioned earlier.

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Matti Riikonen, Carnegie Investment Bank AB, Research Division - Financial Analyst [10]

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Okay. Is there any -- you haven't given any kind of an update on the Hatch financing round. And I was just thinking that, if you don't find a solution for the financing, will you continue to invest in Hatch in the same manner as you have this year, also next year and probably going forward? Or are you kind of thinking that you might scale down the investments if the solution is not found, let's say, by the end of the year?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [11]

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Thanks, Matti. With regards Hatch, the financing round is ongoing. And we will, of course, always look at the situation based on where we are at that moment with or without external investors and then evaluate our future course based on that. So at this point of time, we have the round ongoing, and we will see then how things move forward during this year.

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Operator [12]

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Our next question comes from the line of Richard Farneman of Danske Bank.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [13]

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Richard Farneman from Danske Bank. Could you open up a bit regarding the momentum you've seen in October and November; and further, what we can expect from the portfolio now in December?

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René Lindell, Rovio Entertainment Oyj - CFO [14]

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Thanks, Richard. So of course, this -- I mean it's too early to say, make any comments on the full quarter, as you understand. So I think, when we saw a good uptick in August and September for the organic downloads, we got a good momentum from there. And of course, now we enter the, let's say, "end of the year" holiday season periods. There's a lot of events ongoing; and typically that's a very good, fruitful time for games and live operations. So as Kati mentioned, there's Halloween coming in the weekend. So we have a lot of events, especially in our top games Dream Blast and Angry Birds 2, and additional events in the end of the year, so naturally we are hopeful that the end of the year will be a good one and that we can keep on investing in UA and see also a high level of organic downloads and active, very active, users overall. So I think we'll execute according to plan. And the aim is to keep a high level of new player inflow into the games and keep on growing, as we stated earlier.

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [15]

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And maybe also adding there. The 10th anniversary is coming very soon, so we have special things planned around that as well which, hopefully, will turn out very well.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [16]

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Regarding UA, I'm assuming you're quite high now in Q4, but how are we looking at next year? We can probably not expect a lowered UA guidance next year. And there -- is there a risk that you will have to continually push it higher now with the portfolio that you need or are ramping up again with new games coming out?

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René Lindell, Rovio Entertainment Oyj - CFO [17]

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Yes, I think generally, I mean -- and whenever you are ramping up a new game, you will need more UA to fuel that. That's the way how it goes, so -- and also, in -- the higher you grow, the more UA you will need to kind of also use because that's the fuel that is used for growth. You need to market to get new users in, in new games. So in that perspective there, it really depends on the growth speed as well. And as said, that's something that we need to look at and come back to a bit later as well. Now we are -- we have ramped up Dream Blast and we have 3 games in soft launch, so we'll see when we are in the stage of launching them. And what speed they can scale up is really what we need to see then when we are at that point of time. Or that you can't really say how much they scale before you test it in actual market conditions. So very exciting time for us. And I think we have very good soft-launch games at the moment.

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

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Regarding the newest game, the Sugar Blast game, you've said now that -- well, you released it quite soon -- or just now. And I'm thinking about the UA levels that you are spending on Sugar Blast as from the angle that it's essentially the same game as Dream Blast without the Angry Birds IP, right? But is it harder to market? Is it harder to gain new players? And is this then translating to that the Dream Blast is performing really well due to the Angry Birds brand? Or what's the differences here?

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René Lindell, Rovio Entertainment Oyj - CFO [19]

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I think that's a very interesting question and, of course, too early to say. We just launched the game in September. And as Kati said, we are getting a bit different audience; and that's also part of how we target the UA, that we do target a different audience. And as we get more data and learn how it works, we need to optimize both on the UA side but also on the game side. So we'll have to follow how that works and what speed it scales up, so I think it's overall too early to say after basically less than 2 months going into that. And just have to remember, it was a very low -- very short development time and a short soft launch time. So we are still gaining more data and will ramp up gradually when we see the opportunity. So I think the overall analysis is still to be done a bit later stage when we see how the game scales up.

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

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Regarding the audience, you mentioned that there's more females playing the game. And do you see this as a profitable audience? I reckon that you knew what audience you wanted to target when you released this game. Do you see this as something that you will push for in the future as well in other games?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [21]

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Yes. I mean, for Sugar Blast, exactly. We went after a certain type of audience. And it seems that we are reaching that audience, which is obviously a great thing, but it -- the audience that we are targeting depends on the game very much. So that -- a mid-core game is definitely targeted towards different audience than Sugar Blast. So you need to kind of like find your audience, and like said, it can be very different for different games.

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René Lindell, Rovio Entertainment Oyj - CFO [22]

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And I think good to mention here as well that every audience basically has the potential of being profitable, just to be clear, and the difference typically comes at how big you can scale up. Then it depends on that audience and that game, how that performs, but the profitability is there. That what we see given every audience independent of what kind of demographics it is.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [23]

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Regarding the cooperation negotiations you have now in Brand Licensing, how are those going? Or can you comment them -- comment on them at all?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [24]

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Negotiations started in October 14, and in Finland the negotiations are planned to be concluded after 6 weeks. And this is the regular process and we are going according to the process.

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Richard Farneman, Danske Bank Markets Equity Research - Analyst [25]

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Okay, sure. And lastly, I have a question on Hatch regarding not so much as on the financing round. We're still obviously waiting for some information on that, but how do you see the market right now with Google Play Pass and Apple Arcade and all these subscription-based mobile game services? And not only mobile game, but game services that are focusing more and more on subscription models and then obviously as well on the cloud. Are you -- or is Hatch in a position to actually compete against large entities like Google, Apple, Microsoft, et cetera?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [26]

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Well, I mean, first of all, if we look at the market trends that you were already pointing out, it's true that you see streaming and you see subscription coming. And Hatch is actually or has been spot on by developing the streams service and technology for mobile games. And it is well positioned in this landscape by offering quite unique streaming technology for mobile, especially for mobile games, with strong social elements as well as multiplayer capabilities. So in that sense, Hatch is exactly where it should be.

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Operator [27]

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

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [28]

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It's Veikko Silvasti from Nordea Markets. You gave a yearly run rate for Angry Birds Dream Blast. What will be the yearly run rate for Angry Birds 2 currently, if you can comment on that?

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René Lindell, Rovio Entertainment Oyj - CFO [29]

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Yes. So I think for Angry Birds 2, I would say that it's around what -- the Q3 level, give or take, so basically about that. That's a level where we are targeting to stabilize at the first stage. And then we -- of course, we need to bring new features and events to the game and hope that we have a basis basically also to grow that game through UA, but at the moment, as said, we see a good level of organic downloads, which is positive, and stability is what we seek for first. So now let's see. We are now in the Q4 and we just started the events. And I think it is a very good opportunity for the end of the year to make good improvements. And hopefully, we can also increase the UA spend, but let's see. It's a bit too early to say yet.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [30]

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Okay. Regarding the new game, Sugar Blast. At the moment, obviously it's in the other games portfolio that you report. What was the impact on that portfolio of the game? And can we expect the Sugar Blast to be in the top 5 games during Q4?

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René Lindell, Rovio Entertainment Oyj - CFO [31]

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Yes. Hopefully, it will be in the top 5, but it's not -- let's say we're not sure yet because, I mean, it's growing. But however, we see also that Angry Birds Pop, in the fifth position, is doing quite well. So we'll see if it manage to enter 5 or not in this quarter. So it's too early to tell.

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [32]

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And like said, we are gradually ramping it up because it is a -- it's not an Angry Birds IP that we're using in the game. And there is some learnings and data that we still want to collect to understand that -- how we do that the best way.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [33]

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Okay. And then regarding the Brand Licensing unit, how much of the EUR 5.2 million content licensing revenue would -- was from the Angry Birds Movie 2? And how much was from the Angry Birds Movie 1? If you can comment on that.

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René Lindell, Rovio Entertainment Oyj - CFO [34]

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Sorry. We can't comment on that level of information because, I mean, that's 2 different license deals. And we don't want to give that specific numbers, but I'll say that overall the first movie is delivering according to what we expected, so far. So I think that's pretty clear. And as said, the second movie has been lower than our expectations.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [35]

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Yes, okay. The year-to-date revenue of the Brand Licensing unit is around EUR 19.5 million, and it's lacking EUR 11.5 million to reach the guidance of reaching the same level of last year. What are the reasons for the Q4 to be so much stronger than the Q3, for example, for the segment?

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

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Well, I mean, if we look at the Q4, there is the holiday season, as we were discussing already earlier. And that usually gives a certain boost for this type of activities, but we need to obviously see how Q4 goes. But also, in addition to the consumer products, we have the movie revenues, obviously, which we should be flowing in also in Q4. So we hope that, that will take us there where we want to be.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [37]

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Okay. Okay. And then maybe lastly, when talking about Hatch Entertainment, how would you see the -- if you find a partner, you would sell 30% of your ownership of the subsidiary, right? Could you comment on the possible valuations? Or are you looking to get -- to actually gain some cash flow from that? Or are you just looking for someone who will be willing to invest with you to the projects?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [38]

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Well, what we have said is that we are looking for different financial structures and partnerships, obviously, to accelerate the Hatch's growth. And we are prepared to reduce our ownership below 50%. And discussions are open at this point of time and we need to see where we end, but that's what is ongoing right now and how much we, unfortunately, can say about it at the moment.

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Veikkopekka Silvasti, Nordea Markets, Research Division - Assistant Analyst [39]

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Okay, I understand. Okay. Then lastly, now that the Hatch is live in few markets globally, and then there's this premium account that allows you to enjoy without ads and so on, when can we expect Hatch to start accruing some kind of revenue from ads or the premium subscriptions?

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Kati Levoranta, Rovio Entertainment Oyj - CEO & Interim Head of Games [40]

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Yes. Hatch has been now focusing obviously into this market expansion with different strategic partners. And we are expecting that there will be revenues at some point of time, obviously, coming from the service. That's for sure, but it's a little bit too early to say any exact timing right now. Some of the trials are still in -- or some of the services are still in a trial phase and also free in the sense that only after the free trial then the subscription services would kick in. So we will need to see how that develops.

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Operator [41]

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(Operator Instructions) As there are no further questions at this time, I'll hand back to our speakers for the closing comments.

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Minna Eloranta, Rovio Entertainment Oyj - Senior Communications Manager [42]

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Thank you, operator. So thank you, everyone, for the questions. I think this is -- this concludes our session today.

So thank you, René, and thank you, Kati. And we wish you, everybody, a very good day.