Angry Birds developer Rovio has warned investors to brace for lower than expected profits as it expands its business and user acquisition costs bite.
The Finnish company, which went public in September 2017, stated that group revenues are expected to be €260m to €300m in 2018. Profits before interest and tax is anticipated at nine to 11 per cent.
According to the Thomson Reuters data, revenues had been expected to hit €336m while the operating margin was forecast at 14.5 per cent.
It should be noted however that for the three months ending December 31st 2017, revenues were up 55 per cent to €73.9 million year-on-year, while earnings before income tax were up 85.8 per cent to €10.4 million.
Indeed, it also highlighted some notable KPIs (brackets denoting the previous year):
- ARPDAU grew to 8 cents (4 cents)
- Top five games ARPDAU grew to 14 cents (7 cents)
- MARPPU grew to €35.2 (€27.8)
- Top five games MARPPU grew to €35.6 (€28.2)
The profit warning however comes just months after Rovio released an interim report noting that profits had fallen 70 per cent largely due to increased UA. At the time that announcement saw the company's share price fall by around 20 per cent.
Hatching a plan
In a statement today the company said user acquisition investments are expected to take up around 30 per cent of games revenue for the full year, though this could change depending on a game’s performance and whether costs per acquired user continue to rise.
Interestingly, Rovio plans to invest between €10m to €15m in 2018 in mobile games-on-demand service Hatch.
The mobile app, currently available in select markets including the UK, offers instantly playable games with no IAPs or gameplay limits. The service does include ads however, while a subscription package will also be introduced.
Rovio hopes the investment will pay off by diversifying its portfolio, which currently includes games, film and other licensing opportunities.
Shareholders have reacted negatively to the profit warning, with the company’s share price dropping from €7.53 at open to €4.94.
The developer will release its full-year results statement on March 2nd 2018.