Good afternoon, everyone, and Welcome to Rovio's Q3 2021 Earnings Call. My name is Minna Loranta. I'm a Senior Investor Relations Manager at Rovio, and I'll be your host for today. In today's audiocast, we'll go through Rovio's Q3 2021 financial results. With me here in the studio are Rovio CEO Alexandre Pelletier-Normand and CFO René Lindell. After the presentation, we will host a Q&A session. In order to ask your question, please dial into the conference call number shown on your screen. Your question will then be placed in the queue and asked in order of arrival. Without further ado, Alex, how did we do on Q3? Thank you, Minna. Good afternoon, everyone, and welcome to this Q3 earnings call. Thank you for joining us this afternoon. As usual, we'll go through the highlights of the quarter. Let's jump right into it. We reached record revenues for games with EUR 68.6 million, which represents 7.5% growth year-over-year in comparable currencies. That is the result of a solid performance from our top games like Angry Birds 2, Angry Birds Dream Blast, Angry Birds Friends. Actually, Friends continued to grow and had its best quarter since Q2 2017. Those record revenues, combined with a moderate level of UA, resulted in high profitability, so our adjusted operating profit margin was 20% for the quarter. Also contributing to the margin was Angry Birds Reloaded on Apple Arcade, which had a steady quarter and performed better than expected and provided incremental revenue. In September, we finalized the first part of the Ruby Games acquisition, giving us 20% of the shares. It is also important to note that given the shareholders' agreement, we assume control of the company at that point. We recruited an industry veteran in casual gaming, Julie Beaugrand, who is now building a studio for Rovio in Toronto, Canada. Finally, we created a new position in our leadership team. We now have a Chief Sustainability Officer. It's an important role for us and was appointed to Heini Kaihu. Throughout the quarter, we worked closely with Ruby to finalize the acquisition and strengthened our ways of working together. During the whole time, they haven't been idle. They released another game that reached the top one download in the U.S., which is called Forensic Master or Detective Master, depending on the platform you're playing. They also released Hunter Assassin 2 in soft launch, which is the sequel of Hunter Assassin. You might remember that Hunter Assassin was one of the most downloaded games worldwide in 2020. Hunter Assassin 2 is not a hyper-casual game as the first one was. It's what we call hybrid casual. That means that with this release, Ruby is aiming at creating a longer engagement, deeper monetization mechanics, and that's certainly something that Rovio can help with. We opened a studio in Toronto. It's Rovio's seventh game studio that will be headed by Julie Beaugrand. Toronto, of course, a great city to open a studio given a vibrant gaming ecosystem teeming with great talent. Rovio is a people's first company. The main reason why we wanted to open a studio in Toronto was that we wanted to work with Julie. We first interviewed Julie for a very different role, but it quickly became clear that she was a great fit with our team and that her experience as a leader of team building casual games was invaluable. We're obviously at the very beginning of this adventure. The first priority is to build a solid core team that will be the foundation for the new studio. The idea here is to create a new foothold for Rovio in casual free-to-play market. We have also announced during the quarter that we appointed Heini Kaihu as Chief Sustainability Officer, so CSO. This is a new position for Rovio, and generally speaking, it is also a new position in the industry. This is a reflection of how important sustainability is for Rovio and for the company. I would certainly say that this has been part of the culture of Rovio for years, but as we grew in number of studios this year, we wanted to strengthen our commitment by opening this position. What does this mean? Let's go over the role. At Rovio, the CSO has the responsibility to create long-term value for employees and shareholders alike in a responsible way. When we started thinking about this role, we knew that it would not be an easy one to fill because we were serious about it, really wanting sustainability to be in all of our strategic decisions. We didn't only want someone that understood CSR matters but also understood how the product, the games are made. In this context, it really made sense to appoint Heini to this role. She's been with Rovio since 2012, and prior to heading HR since 2019, she was heading the Puzzle Studio. For those reasons, she was a really great fit for this position. For now, Heini will be still heading HR as well, but we feel that the CSO role is a full-time job, so we are searching for a new person now that will become our CPO or Chief People Officer. The slide that you see on the screen shows our different studios, and I believe it's a good support to cover an evolution we made to our portfolio strategy. Going forward, we will increase our focus towards more casual and wide appeal games. We're still gonna work on games that have RPGs and strategy element, but we will move away from more niche core titles. There are three main reasons to do this. You can see them on the side of the screen. The first one is that, you know, wide appeal games are really our wheelhouse. We created multiple successful games already in this category. Our two top games right now, Angry Birds 2 and Angry Birds Dream Blast, fit this category. This also maximizes the value of our network of users, so acquired users for one game are more likely to play other games in our portfolio this way. That has strategic value, and it makes you way more efficient. The third reason is that we believe that mid-core games are getting more expensive to produce and have high CPIs when released, which makes them harder to scale. It's also good to note that the IDFA deprecation is also a factor making success more challenging for those games. We now have seven studios that have all their own specialties in different part of the market, and this is not gonna change, but all of them are moving towards more accessible art direction and easier-to-pick mechanics. Let's go over the performance of the games one by one. Angry Birds 2 and Angry Birds Dream Blast were stable both quarter-over-quarter and year-over-year. Anecdotally, Angry Birds 2 had its best day last week in the past 15 months. Friends continued its really good year, its growth reaching EUR 8.5 million during the quarter, the best quarter of the game since Q2 2017, four years ago. The game also recently hit the milestone of EUR 200 million in gross bookings since the launch and has grown so far, or at the end of Q3, EUR 5 million year-over-year. Small Town Murders declined slightly, and we have reduced our marketing investment for the game in the quarter. Also worth noting that since the release of Darkfire Heroes, we have not been able to reach a sufficient scale for the game. The team worked on the game, change, to change its trajectory, but it was not sufficient to reach our ambition level. That said, our confidence on the team remains strong. Most of them are now starting a different game, wider appeal, that we feel has more potential. During that time, the game Darkfire Heroes will stay live but will be moved to a lean maintenance mode. You might have noticed that we have two new bars in this graphic. We can start with the purple line there. It represents hyper-casual games. Ruby Games, as said, launched a new game that reached the number one download in the U.S. with Detective Master. There's also a black line now on the screen showing what we call custom contracts, which covers titles like Angry Birds Reloaded on Apple Arcade. The game has been remarkably stable during the quarter, generating EUR 1.6 million. Our pipeline now counts seven live games in either the earn or the growth phase, and this does not count Ruby Games that have a very different pace. We have eight games in different stages of development. Two of them are in soft launch, and you see them on the screen. Supernatural City, match three narrative game that reached soft launch in April, and Angry Birds Journey, a much more casual and wide appeal take on our classic slingshot game with, of course, the Angry Birds IP. This one is now approaching its global launch window, and we're currently testing its scale. Right now, the game is generating about EUR 2 million per quarter in soft launch. Our first Moomin game is also scheduled to reach soft launch before the end of the year. Finally, I wanted to mention that we're approaching a period of activity regarding the Angry Birds brand that we call the Angry New Year. In the months to come, there will be an announcement made regarding releases on different platforms. Let's now go a little bit deeper into the financials, René. Thanks, Alex, and good afternoon to everyone on the call. Let's take a deeper look into the Q3 and year-to-date financials. As Alex mentioned, we, in the Q3, we saw good performance from our top live games. In addition, we had incremental revenue from Angry Birds Reloaded on the Apple Arcade service, and we also included Ruby Games now in our financials starting from the month of September. Our reported revenue grew by 5.1% year-on-year, and games revenue grew 7.5% in comparable currencies. The organic growth for the group, when excluding Ruby Games, was 3.6%. Brand licensing revenue declined as per the trend this year by 24.6%. The decline is driven by the anticipated lower revenue from the Angry Birds movies and from slowdown of deal pipeline in consumer products related to COVID-19. In the second half of 2021, we are already seeing some positive signals in the market for licensing deal flow. However, it takes some time before those deals materialize into recognized revenues, as there are typically a bit longer lead times in physical products. The profitability this quarter was at a high level. The group adjusted operating profit was EUR 14.3 million, and the adjusted operating profit margin 20%. The higher profitability in the quarter was driven by stable performance of our largest live games, the incremental profit from Angry Birds Reloaded, a bit lower user acquisition compared to the previous quarter, and also higher share of advertising revenues in this quarter compared to last year. In year-to-date, our revenue has grown 1.7%, and Games has grown 7.7% in comparable currencies. Brand license revenue declined 24.8%, which is similar as in the Q3. Overall, we are looking at quite solid year-to-date profit with adjusted operating profit at EUR 30.5 million and adjusted operating profit margin of 14.7%. This is lower than last year's 19.5% margin. However, one has to keep in mind that last year we had an exceptionally low level of user acquisition, especially during the first half of the year, and we have been ramping up user acquisition step by step, not only due to the launch of Small Town Murders followed by Darkfire Heroes, but also from good performance in Angry Birds 2 and Dream Blast. The UA in the quarter was moderate level, EUR 18.1 million in total, which is 26.4% of games revenues. Somewhat lower than Q2 of the year, which we had expected already in our last earnings call. In UA investments, we continue to target a 12-month payback time, and we invest up until we reach that point. Whenever we see lower returns than that, we scale back UA for those games, work on improvements for the games, and prepare to scale back up again when we see improved returns. It's normal to have fluctuations on UA levels on a quarter-on-quarter basis, depending on dynamics in the portfolio and in the market. Looking at where we are today in October in terms of UA run rate, we are running a level of UA similar or slightly below the Q3 level. Naturally, UA in these last weeks of the year will depend on a few things, how the games in soft launch are scaling up, but also market dynamics and end of the year, where often cost per installs tend to be at a somewhat elevated level. The Q3 operating cash flow was EUR 16.7 million, and the high cash flow was driven by the high profit in the quarter. Total cash balance at end of the quarter was EUR 143.6 million. We had a cash outflow of net cash of EUR 7.3 million, which was the payment in the first tranche of the Ruby Games acquisition in September. Let's talk a little bit about the daily active user base and revenue per daily active user metrics, where we see an impact of Ruby Games acquisition. The Ruby Games acquisition plays multiple strategic purposes. We enter a new market in the hyper and hybrid casual space. We introduce a new growth vector but also expand the audience network. At the end of Q3, you can see our total DAU growing to 4.9 million as Ruby Games was included in this metric from beginning of September. At the end of the quarter, the group daily active users exceeded six million and thus increased the DAU by approximately 50%. While the DAUs grew by 50%, we see also that because the hyper-casual genre has lower ARPDAU as per nature, compared to our free-to-play portfolio, this means that, Rovio's portfolio ARPDAU is now a bit lower and landing at EUR 0.15 for Q3. If Ruby Games would have been part of Rovio for the full quarter, the ARPDAU would have been approximately EUR 0.11. That's all from our presentation, and now it's time to move on to Q&A. To ask your question, please dial in to the conference call number shown on the screen if you've not done so already. Operator, we are now ready for questions. Thank you. Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. There will be a brief pause while questions are being registered. Our first question comes from Lila Li with Jefferies. Please go ahead. Hi, guys. Could you hear me? Hi. Hello? Hello. Hi. Sorry. Could you guys hear me? Yes. Okay, great. Thank you. First of all, congrats on the strong results. I guess I just would like to get more clarity onto, like, this quarter's margin and also the ad revenues like you mentioned, part of the reason is because higher ad revenues. I'm just like, could you give a sense of, like, the margin for the ad revenues? In addition to that, like, the higher ad revenue seems to be counter to the recent trend we're seeing in the market due to the IDFA disruption. Could you just comment on, like, the impact you see from the IDFA in terms of, like, the advertising revenues please? Thank you. Okay. Thank you for the question. Basically, the advertising revenues are coming with one could say almost 100% gross profit margin. As you probably know, for in-app purchases, there is a 30% cost of sales. That's why the advertising revenues, you know, are impacting the profit a lot more. In Q3 we had more ad revenues than in last year's Q3. Yes, when we had the COVID-19 impact last year, there was some hit on the ad revenues, but those, you know, basically come back to a good level this year since start of Q2 with regards to the IDFA as well, I think the impact overall on our advertising revenues has been much smaller or if, you know, any impact from that perspective. We are looking at actually quite good ad revenue for this year to date, and still looks pretty solid. Got it. Do you see people basically like redirecting advertising to the Angry Birds games because of the big user base or because of the demographics are quite reliable or attractive? Just wondering like what makes Rovio able to, I mean, to be able to stay relatively like not really impacted by the IDFA? Yeah, this is a good question. We don't control exactly who is advertising directly in our games because there's some advertising networks in between. It's true that generally speaking, you know, our games have been very stable even since the IDFA deprecation or ATT's implementation. That also, you know, of course, impacts the stability of our revenues coming from our ads. Got it. I guess my other question regarding it regards to Apple Arcade. What's the future plan for Apple Arcade? Do you plan to add more games onto that platform or? Yes, we're just wondering like what's the future outlook and future plan for Apple Arcade? Yeah. Thank you. That's a good question. I mean, for us, this is a new platform, right? We didn't know exactly what to expect with the game, so we're quite happy with the results so far. Keep in mind that it's working very differently than the other games that we have live. Meaning that, for instance, there's no user acquisition for those games. It's much more complicated for us to, or unpredictable on the trajectory that the games will take. We're learning as we go, right? So far what we can say is that we're happy with the game. We will maintain it, continue to add content on the game to make sure that it remains as high as possible or as stable as possible, right? That it doesn't decline too much with time. As the question about are we gonna do more games on this, then we don't have anything to announce at this point. Those are things that we're thinking about, of course. As soon as we know more, we'll communicate on it. Yep. Got it. That's quite helpful. Thank you so much, guys. Congrats again on the strong results. Thank you. Our next question comes from Fredrik Sandesson with Nordea. Please go ahead. Hi, guys. This is Fredrik Sandesson from Nordea. I have three questions. I'll go one by one. Could you first provide your outlook for user acquisition investments for Small Town Murders, in particular for Q4? Is the game showing such KPIs at the moment that you feel like you could invest more in it? Thank you for the question. Basically, we've taken a bit of pause when it comes to Small Town Murders to basically improve the game, give the team time to optimize and once we see those results also in the UA testing, then we're prepared to scale up. At this point of time, there is no, I think, overall outlook for Q4. We'll have to take it step by step and we'll see when the time comes to scale up again. That's clear. Secondly, regarding Hunter Assassin 2, do you expect the game's global launch to take place still in Q4 this year or in Q1 2022? For this game, it's interesting because it is a hybrid casual game. It's a bit of a new type of game as well for Ruby. It is in soft launch. They're trying to optimize it. It's a little bit more similar to what we see in terms of soft launch to the games that Rovio is doing, right? Basically, they're ready when they're ready and the only way that you can know is by you know, looking at your KPIs and improving the games in soft launch. Until we're ready to press the button, we don't know exactly when it's gonna release. Compared to, you know, sort of a traditional game published previously by Ruby, the soft launch period in this one is, perhaps a bit longer. I would say that compared to the games that Ruby is usually doing, then for sure, because usually it's a matter of days in soft launch, and this is a different one for sure. Right. Finally, regarding PPAs that related to your Ruby Games acquisition, perhaps a question to René. Could you provide some kind of guidance on the quarterly PPA amortization levels that we should expect resulting from the acquisition? Yeah, that's a good question. If you look at the asset base that comes with the acquisition, we do have an estimate on the depreciation. At least we'll start in the next quarter at a let's say annualized level is about EUR 3 million depreciation that we'll start with. Of course, that, you know, it's always gonna be live depending on the actual outlook of those games. That's basically the plan at this point of time, while the PPA is still being finalized. This is not the final PPA, but the preliminary one. Okay. That's very helpful. Thanks a lot, guys. As a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. Our next question comes from Veiko Silvast with Danske Bank. Please go ahead. Hey, it's Veiko from Danske. First question regarding Angry Birds 2 and its download rankings. It seems like the download rankings, at least according to data from App Annie, it has been improving a bit during the past few months. What's behind this kind of increase in downloads in AB 2? Is it already the effect of this cross promotion from Ruby Games? I mean, that's a very good question, and usually there's not a simple answer to those questions. It's true that we saw that in the past weeks and even months, the downloads and DAUs for Angry Birds 2 have been doing well. We attributed some of this to we were able to do good user acquisition, generally speaking, on the game. Also, when we did release Angry Birds Reloaded on Apple Arcade, we saw an effect, right, on the downloads for other Angry Birds game, like Angry Birds Friends and Angry Birds 2. That's how we see it. Of course, there's improvement in the games that are aiming at re-engaging users that have an impact as well. You know, what's the proportion of each of those factors? It's, it's hard to tell. Okay. Interesting. Good to hear. Secondly, regarding Q4, usually it's a strong quarter, for revenues and also a bit more expensive for CPI. Do you think this trend will also pan out this year? Yes. I think, you know, Q4 typically is one of the most exciting times in the industry because there are a lot of special holidays where we plan a lot of events. Of course, October month already saw these events. We have Halloween and so on. You know, we are, you know, having high expectations for the Q4 as always. Again, it also means that from a UA perspective, traditionally, and really end of the year, the cost per installs tend to be a bit elevated. Then we of course don't invest as much UA because then the returns tend to be lower. Let's see how this year performs, that's what typically has happened. Okay. Thirdly, regarding the M&A market, well, obviously our cash position is at all-time highs, at least close to it. Very strong cash flow and over EUR 140 million in cash at hand at the moment. Regarding the M&A market, is it cooling down a bit? Looking at some of the compounders in the mobile gaming space or gaming space in general, they haven't been doing too well lately. Is the biggest acquisition boom in mobile gaming over already, or how do you see it? Yes, I think overall, I mean, there has been, you know, I think a lot of deal activity this year as well. I don't have the numbers, you know, whether exactly how that compares to last year at the same time. I think I'll take your word for it. I think there's still a lot of deal activity. We see a lot of interesting things ongoing, both in different size of companies. There's a lot of startups, both in creation and they are raising money. I think it's still very interesting from that perspective. We are, you know, constantly on the lookout and screening the market as well to see, you know, if we can find a good fit for Rovio. As said, you know, we are taking our time always to scrutinize these cases and ensure that it's really value-adding and fits our strategy in the long term. Okay. Clear. Yeah, it just seems that the announcement of other big players that, for example, in 2020 were buying almost monthly, it's been more quiet lately. Then maybe moving on to the new areas of Ruby Games, quite high user acquisition costs there, but then again, the revenue is ad-based and has higher margins. Is it reasonable to assume that the user acquisition spend for these hyper-casual games will be around 50% or even above 50%, I mean, or above, also going into the next years and next quarters? I think that really depends on what stage they are in terms of testing games, scaling up games, and so on. It, you know, it can vary quite a lot also in there, but I think those levels are, I think as you said, is what we've been seeing. Pretty stable, if you look at month-by-month this year. I think that's I guess where we are at this point of time with this revenue level and with the portfolio they have. Of course, you know, if they launch a game that scales up quickly, then you could see, you know, a few months there, maybe a quarter of really elevated UA for that time and then basically coming back when the revenue follows in the upcoming quarters. It reacts much faster to the UA because the fast payback times compared to the rest of the portfolio. Interesting. Finally, about Angry Birds Journey. Already EUR 2 million in revenue in a quarter, and it's in soft launch with limited UA cost, I mean. What are your expectations on this? Obviously, it's a lower risk venture than Darkfire Heroes was, for example. How should we look at it? Yeah, I mean, right now we are in the stage where, you know, we're kind of like at the end of the soft launch period, so we're testing the scale, and that's why, you know, the scale is pretty high at the moment. I think one of the things that we're trying to do now, when the game is in soft launch is really to push on the scale side of things to see where the limit is before we launch globally. That's part of it. Now, how it's gonna unfold with this game, we don't know precisely. We're not done with those tests. We will see more in the weeks to come. So yeah, I mean, good level for a game in soft launch. Yeah, definitely. This is very close to the legendary Angry Birds, the original one. Very interesting to see how it goes. That's all for me. Thank you. There are no further questions. I hand back the words to our speakers. Thank you, operator. That concludes our call today. I want to thank Alex and René and everyone online for your questions and joining us today. Have a good day, and Happy Halloween.