Casual Games Leader's Quest for Golden Eggs

Home , Angry Birds Blast, Angry Birds Friends, Casual game, Games as a service, Rovio Entertainment

Commissioned Equity Research • 19 June 2019

Telecom Equipment and IT Rovio Finland

KEY DATA Casual games leader's quest for golden eggs

Stock country Finland Bloomberg ROVIO FH Having been around for about ten years, the Angry Birds brand has proved Reuters ROVIO.HE its longevity and Rovio its ability to monetise the entertainment franchise Share price (close) EUR 7.31 through engaging casual mobile games and brand licensing. The solid Free Float Market cap. (bn) EUR 0.58/EUR 0.58 balance sheet and positive cash flow allow the company to pursue growth Website http://www.rovio.com/ objectives through organic and inorganic means. We believe the biggest Next report date 08 Aug 2019 risks for the company relate to rising user acquisition costs, a possible decline of the Angry Birds brand and failure to diversify the game portfolio PERFORMANCE to include new genres.

12 Rovio is still all about Angry Birds which we view as a strength

10 Of Rovio's 22 live mobile games, the top ﬁve are based on the Angry Birds

8 (AB) brand. The two top-grossing games in 2018, AB 2 and AB Friends, are

6 slingshot games that were launched in 2015 and 2012, respectively. The success of these games proves Rovio's solid category leadership, capability 4 to monetise its brand, and its ability to run live operations to engage 2 Sep17 Apr18 Nov18 Jun19 gamers and prolong the lifetime of its games. Its brand and slingshot genre leadership create a stable cash-generating core for Rovio. Rovio Source: Thomson Reuters Finland OMX Helsinki All-Share (Rebased) Upside from a flock of upcoming game titles and bolt-on M&A In order to achieve meaningful growth, Rovio aims to diversify its game VALUATION APPROACH portfolio from the casual and AB-themed games through in-house development and bolt-on M&A. Current initiatives include the launch of AB P/E 6.9 10.4 Dream Blast in Q1 2019, the acquisition of strategy game developer PlayRaven in Q4 2018, and incubation of the Hatch mobile game streaming EV/EBIT 6.1 8.5 service. Rovio should launch a new game in H2, after which we expect two new game launches per year. We estimate the new games to have a DCF 7.2 9.4 slightly weaker KPI performance on average than the recently launched AB DCF Monte Carlo Dream Blast, leading to a 7% sales CAGR on a group level during 2018-21E, simulation, 10th- 6.6 9.5 90th percentiles and an EBIT margin of 13% (14% ex-Hatch) in 2021E, from 11% in 2018.

4 6 8 10 12 Source: Nordea estimates DCF and peer multiples suggest valuation range of EUR 6.8-9.4 We derive a DCF valuation range of EUR 7.6-8.7 per share by applying a ESTIMATE CHANGES WACC of 8-12%. We perform a Monte Carlo simulation with game KPIs (MAU, DAU/MAU and ARPDAU) and calculate the 10th-90th percentile Year 2019E 2020E 2021E values to be EUR 6.6-9.5 per share. We also include relative valuation with Sales n.a. n.a. n.a. EBIT (adj) n.a. n.a. n.a. P/E and EV/EBIT multiples derived from relevant Nordic gaming Source: Nordea estimates companies and global mobile gaming companies. The averages of the upper and lower limits for different valuation approaches equal a valuation range of EUR 6.8-9.4.

SUMMARY TABLE - KEY FIGURES Nordea Markets - Analysts Sami Sarkamies EURm 2015 2016 2017 2018 2019E 2020E 2021E Senior Analyst Total revenue 142 192 297 281 315 333 347 EBITDA (adj) -6 35 65 48 50 50 51 Veikkopekka Silvasti EBIT (adj) -22 17 36 31 37 40 44 Analyst EBIT (adj) margin -15.2% 8.8% 12.1% 11.1% 11.8% 12.1% 12.7% EPS (adj) -0.24 0.14 0.33 0.30 0.37 0.40 0.44 Ville Tiainen EPS (adj) growth -323.7% 158.8% 130.7% -7.7% 23.6% 8.4% 9.5% Senior Analyst DPS (ord) 0.00 0.06 0.06 0.09 0.11 0.12 0.13 EV/Sales n.a. n.a. 2.2 0.7 1.3 1.2 1.0 EV/EBIT (adj) n.a. n.a. 17.8 5.9 11.4 9.7 8.2 P/E (adj) n.a. n.a. 27.6 12.7 19.6 18.1 16.5 P/BV n.a. n.a. 5.2 1.9 3.2 2.8 2.5 Dividend yield (ord) n.a. n.a. 0.7% 2.4% 1.5% 1.7% 1.8% FCF Yield bef A&D, lease n.a. n.a. 8.2% 14.0% 7.8% 6.7% 6.7% Net debt -10 -10 -88 -120 -158 -188 -218 Net debt/EBITDA 1.5 -0.3 -1.5 -2.5 -3.2 -3.8 -4.2 ROIC after tax -31.6% 18.5% 43.9% 53.6% 91.5% n.m. n.m. Source: Company data and Nordea estimates

Marketing material commissioned by Rovio 19 June 2019 Rovio Contents

Factors to consider 3

Valuation 7

Estimates 12

Rovio's market 20

Rovio in brief 30

Game portfolio – fewer, bigger and better 38

Business model 44

Risk factors 48

Reported numbers and forecasts 49

Disclaimer and legal disclosures 52

Marketing material commissioned by Rovio 2 19 June 2019 Rovio Factors to consider

Rovio is best known for the global Angry Birds brand, which started out as a popular mobile game in 2009, and has since evolved to include various entertainment and consumer products through brand licensing and movies. We believe that the well-recognised Angry Birds brand, the company's leading position within the slingshot games genre, its solid net cash position and its experienced team of developers will drive growth ahead. The main risks, in our view, lie in rising user acquisition costs, potential deterioration of the global Angry Birds brand, failure to diversify into new game genres and potential risks related to bolt-on M&A activity.

Angry Birds is a global brand with high recognition We believe Angry Birds is We believe that the strong brand value of Angry Birds benefits the company in two Rovio's "secret sauce", enabling ways. Firstly, the global awareness of the brand improves organic user acquisition in better organic user acquisition the hyper-competitive mobile games market. Given that the cost of acquiring a paying and a profitable product and customer has been steadily rising, all leverage that can generate organic downloads is content licensing business highly valuable. Secondly, a strong brand enables the company to run a profitable product and content licensing business, which also further strengthens the brand awareness. Thus, we view the Angry Birds brand as Rovio's "secret sauce" in terms of discoverability and user acquisition challenges. The upcoming Angry Birds Movie 2 in August and the ten-year Angry Bird anniversary celebrations in December are testimonies to the brand's versatility and longevity.

RECOGNITION OF SELECTED "MOBILE-BORN" BRANDS, % RECOGNITION OF SELECTED GLOBAL BRANDS, %

100% 97% 100% 97% 96% 80% 94% 95% 93% 80% 70% 91% 90% 60% 85% 40% 80% 20% 75%

0% 70% Angry Birds Candy Crush saga Clash of Clans Angry Birds Star Wars Frozen Hello Kitty Pokemon

Source: Lieberman Research Worldwide, 2017 Source: Lieberman Research Worldwide, 2017 Core portfolio ensures stable cash flow but requires constant refreshment Rovio has a robust portfolio of Rovio's current game portfolio includes 22 titles. However, in line with its "fewer, bigger core games that has proven its and better" logic for the game portfolio, signiﬁcant resources (developer hours and ability to generate stable gross marketing expenses) are invested in just the top four or ﬁve games. As illustrated sales... below, Rovio's game portfolio has delivered relatively stable quarterly gross sales of EUR 60m or above since Q2 2017. However, every game carries a lifetime, and Rovio ...but every game has a lifetime cannot expect to keep on delivering such robust gross sales without launching new and new games need to be games. The portfolio received a much needed boost when Rovio launched AB Dream constantly added to maintain Blast in Q1 2019 and we expect another game to be unveiled before year-end. and grow the business Furthermore, we forecast that Rovio will launch two games per year in 2020 and 2021.

Marketing material commissioned by Rovio 3 19 June 2019 Rovio

GROSS SALES PER GAME, EURm

80 67 67 66 70 63 65 65 63 60 60 56 14 10 15 15 16 16 14 15 7 50 47 10 3 5 7 4 3 7 3 40 6 4 36 13 7 9 7 7 7 40 10 6 8 29 12 11 11 8 8 7 30 12 8 9 86 12 8 8 9 8 7 20 7 10 8 8 31 35 32 5 8 30 10 6 20 21 18 20 22 12 16 6 9 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 Angry Birds 2 Angry Birds Friends Angry Birds Blast Angry Birds Evolution Angry Birds Match Angry Birds Pop! Angry Birds Dream Blast Other

Source: Company data and Nordea estimates AB Dream Blast has been making progress recently Looking at the top grossing rank of all games from the US App Store (App Annie), we conclude that Rovio's top games at present have performed quite stably over the past three months. AB 2 has maintained its position as the top grossing game by Rovio (since Q1 2016) and ranks among the top 100 grossing games on the US App Store, with the top grossing rank varying between the 80th and 48th position. This means that out of all of the games on the US App Store, AB 2 ranks 55th when sorted by revenue. AB Dream Blast has enjoyed a slight upward trend recently, implying that it may very well take over as Rovio's second-largest game during Q2. In addition, AB Match is still in growth stage and has performed slightly better over the past three months. We have not included AB Friends in the chart as the US is not the game's main market.

TOP GROSSING GAMES RANK FROM US APP STORE

20 48 40 55 56 55 54 56 52 54 55 57 63 62 59 68 72 60 80 80 110 100 119 119 117 127 127 126 120 137 138 138 136 137 150 144 144 140 161 165 165 160 172 171 172 171 184 184 180 179 193 195 193 180 200 202 200 213 220

AB 2 AB Dream Blast AB Match

Source: App Annie Challenges in terms of discoverability and rising UA costs will persist Hundreds of mobile games are The gaming apps space is crowded and competitive. In this arena, the ability to acquire launched every day, making and engage highly valuable audiences can make or break a business. According to discoverability one of main mobile app marketing platform Liftoff, the average cost of acquiring a paying customer hurdles for mobile gaming in a gaming app rose from USD 65.9 to USD 101.6 during 2016-18. On an industry level, companies this is a good sign as rising costs reflect higher expected lifetime value (LTV) per customer. However, on a company level, inflating UA costs elevate the required LTV of new gamers, which in turn requires developers to come up with new and ingenious games or continuously improve their existing ones. However, the soaring UA costs can also act as a barrier of entry for newcomers, strengthening the position of already established companies with an existing gamer base, brand and good cash position, such as Rovio.

Marketing material commissioned by Rovio 4 19 June 2019 Rovio

PER CUSTOMER ACQUISITION COSTS IN MOBILE GAMES, USD IN-APP PURCHASE: MONTHLY COSTS AND ENGAGEMENT RATES, USD AND % 120 101.6 140 5% 100 120 4% 76.4 80 100 65.9 80 3% 60 60 2% 40 40 1% 20 9.4 8.9 20 4.1 3.8 2.9 5.1 0 0% 0 Install Register In-App-Purchase 2016 2017 2018 Monthly costs Engagement rates Source: Liftoff (2018 Mobile App Engagement Index) Source: Liftoff (2018 Mobile App Engagement Index) Ability to engage and monetise According to industry experts, Despite Rovio not releasing any new games in 2018, sales in the Games segment the ability to run efficient live increased 1% y/y that year. This illustrates Rovio's ability to run good live operations of operations to prolong the existing games so that gamers keep coming back to their AB-themed slingshot or lifetime of games is scarce puzzle games, and spending money while doing so. However, for the company to achieve growth of 1% for the Games segment, Rovio needed to invest another EUR 9m in user acquisition (UA), ie 13% more y/y. The rapid growth in UA investments reflects the tightening competition in the mobile gaming industry, which has led to bigger UA costs.

Strong net cash position supports game development and M&A activity Solid portfolio of core games We note that Rovio's strong balance sheet is strategically important in the mobile supports Rovio's cash position gaming industry, where development and user acquisition costs require front-loaded investments. In addition to the aforementioned activities, Rovio's net cash position of EUR 122m (as of Q1 2019) provides M&A ﬁrepower if and when the company wants to diversify into new game genres or businesses.

CASH AND NET GEARING, EURm AND %

140 -58% -60% 120 -62% 100 -64% -66% 80 -68% 60 -70%

40 -72% -74% 20 -76% 0 -78% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Cash at the end of the period Net gearing %

Source: Company data Mature games enjoy higher margins While some mobile games thrive for several years, others start declining much faster. Eventually, every game matures, but that does not necessarily need to be negative. Once a game matures, Rovio needs to invest far less in marketing, while retaining long- tail earnings for a long time after the game has reached peak sales. This means that revenue from some mature assets can decline each year, but without any UA costs, thus leading to gross margins of almost 70% (after the 30% cut taken by app stores). In other words, high margins should offset periods of negative revenue growth.

Marketing material commissioned by Rovio 5 19 June 2019 Rovio

Group revenue to grow at a CAGR of 7% during 2018-21E We expect group revenue to For the Games unit, we model 2019E-21E revenue using a bottom-up approach, whereas for grow at a CAGR of 7% in 2022E-24E, we apply a conservative steady growth rate of 5%. Moreover, we estimate that 2018-21, with sales growth gross proﬁt will remain around 68% during the entire forecast period of 2019-24. We base driven mainly by the Games this on the current competitive situation in the platform market. On a group level, we model unit as we expect Brand that revenue will grow at a CAGR of 7% during 2018-21E. We believe the group revenue Licensing sales to decline after growth will be driven solely by the Games business unit during 2020-21 as we model the 2019 movie launch declining sales for Brand Licensing after the launch of the AB Movie 2 in 2019. Growth in operational expenses should remain in line with revenue growth, though we believe user acquisition costs will create upwards pressure. In addition, we expect the company to achieve an EBIT margin of 13% (14% excluding Hatch) by 2021, after 11% in 2018 (14% excluding Hatch). For 2019, Rovio expects to achieve sales of EUR 300-330m (7-17% growth) with an EBIT margin of 9-11% (12-14% excluding Hatch). For 2019, we estimate sales growth of 12%, in line with company guidance, with an EBIT margin of 12% (15% excluding Hatch), which is slightly above guidance.

Our estimates are ahead of consensus on growth but below on margins Consensus expects slowing Thompson Reuters consensus currently expects decelerating growth and an improving growth and an improving EBIT EBIT margin for 2020-21. We believe that Rovio will be able to remain on its growth margin in 2020-21 path and forecast a lower EBIT margin than consensus. Consensus expects sales to grow by 13% in 2019 (-5% in 2018), while estimates for 2020 and 2021 are at 7% and -1%, respectively. We estimate sales will grow 12% in 2019, while 2020 and 2021 estimates are at 6% and 4%, respectively. Along with slowing sales growth estimates, consensus expects the EBIT margin to improve from 10% in 2019E (11% in 2018) to 21% in 2021E. We estimate that Rovio will deliver an EBIT margin of 12% (15% excluding Hatch) in 2019, with only slight margin expansion to 13% (14% excluding Hatch) for 2021. We note that Rovio's long-term ﬁnancial goals from 2016-17 target growth above that of the western mobile gaming market and a 30% EBIT margin. The company has made little progress on this front, however.

Management still needs to prove ability to expand outside of core genres Despite signiﬁcant operational Over the years, management has carried out some signiﬁcant operational changes and changes and transformations, transformations, such as fully transitioning the games monetisation model to free-to- management has not been able play, growing the Games business unit, restructuring the Brand Licensing business unit to expand the company's to regain focus on core operations and products, and transforming the business model offering beyond casual for movies and animated series to full licensing. Moreover, the team's newest addition, slingshot and puzzle games head of Games, Alexandre Pelletier-Normand, has a strong background from global giants Gameloft and Vivendi. However, so far, the management team has been focussed on operating the AB brand and existing games, and has not been able to expand the company's offering beyond the casual slingshot and puzzle games.

Bolt-on M&A complements in-house development Rovio aims to acquire smaller Rovio views smaller bolt-on acquisitions as a means to acquire new talent, which game studios to attain new speeds up expansion into new gaming genres. Recently acquired PlayRaven, a gaming talent and enable faster time to company focused on strategy games, is an embodiment of an optimal takeover target market for new games in terms of business logic and risk. In addition, Rovio has indicated that it is seeking external investors to fund Hatch Entertainment's mobile game streaming service and is willing to dilute its 80% stake. We view Hatch as a binary project that will prove to be a major success or a flop. Our estimates do not include revenue from Hatch. Overall, we believe that potential problems in terms of cultural ﬁt between Rovio, PlayRaven and other possible targets represent the largest risk in terms of M&A activity.

DCF and peer multiples suggest a valuation range of EUR 6.8-9.4 We derive a DCF valuation range of EUR 7.6-8.7 per share by applying a WACC of 8-12%. We perform a Monte Carlo simulation using game KPIs (MAU, DAU/MAU and ARPDAU) and calculate the 10th-90th percentile values to be EUR 6.6-9.5 per share. We also include relative valuation with P/E and EV/EBIT multiples derived from relevant Nordic gaming companies and global mobile gaming companies. The averages of upper and lower limits for different valuation approaches yield a valuation range of EUR 6.8-9.4.

Marketing material commissioned by Rovio 6 19 June 2019 Rovio Valuation

Our valuation is based on two fundamental assumptions: 1) on a group level, revenue should grow at a CAGR of 4% during 2019E-24E; and, 2) we expect the company to deliver a 12-16% adjusted EBIT margin over the forecast period. Using primarily a DCF valuation and assuming a WACC of 8-12%, we derive an equity value range of EUR 7.2-9.4 per share. We also complement our DCF framework with a multiples-based relative valuation approach and a Monte Carlo simulation.

DCF model points to a value of EUR 7.2-9.4 per share Our bottom-up valuation of Rovio focuses on current game titles, pipeline potential and licensing. In our view, the solid strategy, which centres on the strong Angry Birds brand, strong cash flow, ample liquidity and a capable management, bodes well for future performance. Using a WACC of 8-12%, we derive an equity value range of EUR 7.2-9.4 per share.

Furthermore, we add weight to our DCF valuation by conducting a Monte Carlo simulation with 10,000 draws. The probabilistic variables simulated are the three main KPIs: monthly active users (MAU), user engagement (DAU-to-MAU ratio) and average revenue per daily active user (ARPDAU). All variables are simulated on a portfolio level annually in order to derive a probability distribution for our DCF valuation. The valuation range is based on the 10th and 90th percentile cut-off values of EUR 6.6 to EUR 9.5 per share, respectively. In our simulation, revenue from the Brand Licensing unit is modelled at 5% of the Gaming unit's revenue per ﬁscal year, whereas revenue from the Other segment is expected to remain zero.

We also complement our DCF approach with a multiples-based relative valuation but note that a direct peer comparison is difficult owing to the different release cycles, accounting principles and risks related to the IP and games portfolios.

Valuation reflects our expectation of steady performance We base our DCF valuation on a bottom-up approach, where we forecast current and upcoming quarterly revenue for games on a game-by-game basis during 2019-21. User acquisition and marketing costs are modelled with the same approach for the corresponding period. Valuation of the Brand Licensing business is conducted with a similar bottom-up approach, where we forecast quarterly revenue, proﬁtability and capex for the business unit.

We believe that Rovio will deliver good organic revenue growth with a healthy operating margin of 12-16%. We expect that the upcoming Angry Birds Movie 2, which is to be released in August 2019, will give a notable boost to the company's EBIT through the content and consumer products' licensing businesses. We expect the company to exceed its guidance range of 9-11% adjusted operating proﬁtability and deliver a 12% EBIT margin for the full-year 2019. Furthermore, we forecast that the operating margin will improve gradually throughout our explicit forecast period of 2019-24, reaching 16% in 2023.

In addition to decent organic growth prospects and healthy operating margins, the company's ample liquidity, negative net debt and limited capex needs support our valuation. More detailed estimates are presented in the 'Estimates' section of this report.

The WACC we apply to our DCF valuation is 10%. The ﬁgure assumes 100% equity weight, a 4.0% market risk premium, a risk-free rate of 2.5% and an equity beta of 1.875.

Marketing material commissioned by Rovio 7 19 June 2019 Rovio

DCF VALUATION WACC COMPONENTS DCF value Value Per share Risk-free interest rate 2.5% Market risk premium 4.0% NPV FCFF 491 6.2 Forward looking asset beta - (Net debt) 120 1.5 Beta debt 20.0% Market value of associates 0 0.0 Forward looking equity beta 187.5% (Market value of minorities) 0 0.0 Cost of equity 10.0% Surplus values 0 0.0 Cost of debt 7.0% (Market value preference shares) 0 0.0 Tax-rate used in WACC 20.0% Share based adjustments 0 0.0 Equity weight 100.0% Other adjustments 0 0.0 WACC 10.0% Time value 27 0.3 DCF Value 638 8.1 Source: Company data and Nordea estimates Source: Company data and Nordea estimates

DCF ASSUMPTIONS Averages and assumptions 2019-24 2025-29 2030-34 2035-39 2040-44 2045-49 Sust. Sales growth, CAGR 4.50% 3.5% 3.5% 3.5% 3.0% 2.5% EBIT-margin, excluding associates 14.0% 12.5% 12.5% 12.5% 12.5% 0.0% Capex/depreciation, x 0.6 0.60 0.70 0.80 0.90 1.00 Capex/sales 1.1%0.0%0.0%0.0%0.0%0.0% NWC/sales -1.8% -1.8% -1.8% -1.8% -1.8% -1.8% FCFF, CAGR 2.0% -1.3% 3.5% 3.5% 3.1% -71.7% 2.5%

Source: Company data and Nordea estimates

Monte Carlo simulation adds depth to our DCF-derived value Unlike a scenario analysis, where we would look at the values under discrete scenarios, simulations allow for more flexibility in how we deal with uncertainty. We believe that a simulation provides a bigger picture of the risk related to an asset or investment. This is especially true for young and small mobile gaming companies with limited track records.

We opt to use MAU, DAU-to-MAU and ARPDAU as our probabilistic variables for which we deﬁne probability distributions and parameters. Furthermore, we model zero correlation between the variables. All variables are simulated on the portfolio level annually. We assign gamma, uniform and normal distributions for MAU, DAU-to-MAU and ARPDAU, respectively. Histograms, descriptive statistics and relevant percentiles for all probabilistic variables are presented below.

ARPDAU HISTOGRAM, EUR AND NUMBER OF OBSERVATIONS ARPDAU PERCENTILES AND CUT-OFF VALUES, % AND EUR

2500 10th 0.07 20th 0.08 2000 30th 0.09 40th 0.10 1500 50th 0.10 60th 0.11 1000 70th 0.11 80th 0.12 500 90th 0.13

0 99th 0.15 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 ARDPAU Source: Company data and Nordea estimates

Source: Company data and Nordea estimates

Marketing material commissioned by Rovio 8 19 June 2019 Rovio

MAU HISTOGRAM, MILLION PLAYERS AND OBSERVATIONS MAU PERCENTILES AND CUT-OFF VALUES, % AND MILLION PLAYERS 3500 10th 30.8 3000 20th 35.0 30th 38.0 2500 40th 40.9 50th 43.7 2000 60th 46.7 1500 70th 50.2 80th 54.4 1000 90th 60.5 99th 76.0 500 Source: Company data and Nordea estimates 0 10 20 30 40 50 60 70 80 90 100 MAU

Source: Company data and Nordea estimates

DAU/MAU HISTOGRAM, % AND OBSERVATIONS DAU/MAU PERCENTILES AND CUT-OFF VALUES, % AND %

1600 10th 16.7% 20th 17.4% 30th 18.1% 40th 18.8% 50th 19.5% 60th 20.2% 70th 20.9% 1400 80th 21.6% 90th 22.3% 99th 22.9%

Source: Company data and Nordea estimates

1200 17% 18% 19% 20% 21% 22% 23% DAU/MAU

Source: Company data and Nordea estimates

The parameters in our Monte Carlo simulation are calibrated so that the median value of 10,000 simulations equals our primary DCF valuation. The share price distribution and relevant descriptive statistics based on 10,000 simulations are presented below.

SHARE PRICE DISTRIBUTION, EUR AND NUMBER OF OBSERVATIONS

4000

3500

3000

2500

2000

1500

1000

500

0 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 Share price range

Source: Company data and Nordea estimates

SHARE PRICE PERCENTILES AND CUT-OFF VALUES, % AND SHARE PRICE DESCRIPTIVE STATISTICS EUR Mean 8.2 1st 5.9 Median 8.1 10th 6.8 Min 4.6 50th 8.1 Max 12.2 90th 9.6 St.Dev 1.1 99th 10.9 Source: Nordea estimates Source: Nordea estimates

Marketing material commissioned by Rovio 9 19 June 2019 Rovio

Relative valuation complements our DCF model Our peer group valuation consists of listed Nordic gaming companies and relevant international mobile gaming companies. For an optimal comparable company, we would need to ﬁnd a peer with a similar gaming market, product strategy and release schedule. This is a challenging task, to say the least; therefore, we consider a multiples- based valuation to be a good complement to a DCF valuation, which we consider the most relevant option when valuing gaming companies' earnings potential.

In terms of benchmarking, we regard enterprise value (EV)-based multiples, such as EV/EBITDA and EV/sales, as the most relevant multiples for the gaming sector. The advantage of the former is that it is not affected by the large accounting differences with regards to amortisation and depreciation across the companies. The latter is interesting thanks to its stability – from time to time, other multiples can be inflated as a result of timing effects in revenue recognition and game releases, while EV/sales, although also volatile, varies far less. Other multiples can swing higher due to margin proﬁles when titles reach peak sales. EV multiples are also neutral to a company's ﬁnancial gearing. We also add the traditional P/E multiple to complement our EV- based relative valuation framework.

Relevant peer group consists of Nordic gaming companies... As mentioned above, to add granularity to our relative valuation, we divide our peer universe into listed Nordic gaming companies and relevant international mobile gaming companies. As can be seen from the standard deviation of different pricing multiples and market capitalisation, comparable companies comprise a homogenous group.

A key highlight from the Nordic peer comparison is that, based on our DCF valuation, Rovio's P/E, EV/EBIT, EV/EBITDA and EV/sales multiples are all in line with Nordic peer medians for 2020 estimates.

NORDIC GAMING COMPANIES P/E EV/EBIT EV/EBITDA EV/SALES Name Country Mcap EURt 19E 20E 19E 20E 19E 20E 19E 20E THQ Nordic (NDEA) Sweden 2001 22.5 18.2 15.1 12.6 14.6 11.1 3.5 2.9 Paradox Interactive Sweden 1458 34.9 28.6 26.6 21.8 18.4 14.6 11.0 9.1 Stillfront Group (NDEA) Sweden 569 19.3 15.9 13.7 10.9 9.4 7.6 3.4 2.8 G5 Entertainment Sweden 72 7.0 6.5 5.2 4.7 2.7 2.5 0.5 0.5 Starbreeze (NDEA) Sweden 45 61.7 107.7 26.3 3.7 1.9 1.3 MAG Interactive Sweden 31 21.9 8.8 3.5 0.8 0.7 Next Games (NDEA) Finland 30 46.1 31.4 8.3 0.9 0.7 Remedy Entertainment Finland 103 14.7 12.0 9.2 7.6 9.2 7.6 2.5 2.2

Rovio Entertainment (NDEA) Finland 638 21.7 20.0 12.9 11.2 9.6 9.0 1.5 1.4

Average 539 19.7 26.3 14.0 25.7 13.4 7.4 3.1 2.5 Median 88 19.3 20.0 13.7 11.7 12.0 7.6 2.2 1.7 Min 30 7.0 6.5 5.2 4.7 2.7 2.5 0.5 0.5 Max 2001 34.9 61.7 26.6 107.7 26.3 14.6 11.0 9.1

Source: Thomson Reuters and Nordea estimates (18 June 2019)

...and global mobile gaming companies In addition to Nordic gaming companies, global mobile gaming companies constitute another relevant peer group for Rovio. In general, as with the Nordic peers, the median multiples based on 2020 estimates reflect Rovio's corresponding multiples. As mentioned above, we consider the comparative valuation as a complement and sanity check to our DCF valuation and the related Monte Carlo simulation.

Marketing material commissioned by Rovio 10 19 June 2019 Rovio

MOBILE GAMING COMPANIES P/E EV/EBIT EV/EBITDA EV/SALES Name Country Mcap EURt 19E 20E 19E 20E 19E 20E 19E 20E G5 Entertainment Sweden 72 7.0 6.5 5.2 4.7 2.7 2.5 0.5 0.5 MAG Interactive Sweden 31 21.9 8.8 3.5 0.8 0.7 Next Games (NDEA) Finland 30 46.1 31.4 8.3 0.9 0.7 Zynga U.S. 5174 27.2 22.4 21.9 17.8 21.0 16.7 3.9 3.5 Glu Mobile U.S. 919 20.4 13.2 17.4 10.9 16.7 10.4 2.1 1.8

Rovio Entertainment (NDEA) Finland 638 21.7 20.0 12.9 11.2 9.6 9.0 1.5 1.4

Average 1245 18.2 22.0 14.8 14.7 13.5 8.3 1.6 1.4 Median 72 20.4 21.9 17.4 10.9 16.7 8.3 0.9 0.7 Min 30 7.0 6.5 5.2 4.7 2.7 2.5 0.5 0.5 Max 5174 27.2 46.1 21.9 31.4 21.0 16.7 3.9 3.5

Source: Thomson Reuters and Nordea estimates (18 June 2019)

DCF and peer multiples imply an average valuation range of EUR 6.8-9.4 We derive a DCF valuation range of EUR 7.2-9.4 per share by applying a WACC of 8-12%. We also complement our DCF model with relative valuation multiples – P/E and EV/EBIT – derived from relevant Nordic gaming companies and global mobile gaming companies. The averages of the upper and lower limits for different valuation approaches equal EUR 6.8-9.4. Our Monte Carlo simulation conducted with our DCF model implies 10th and 90th percentile values of EUR 6.6 and EUR 9.5, respectively.

VALUATION APPROACHES, EUR PER SHARE

P/E 6.9 10.4

EV/EBIT 6.1 8.5

DCF 7.2 9.4

DCF Monte Carlo simulation, 6.6 9.5 10th-90th percentiles

4567891011

Source: Company data and Nordea estimates

Marketing material commissioned by Rovio 11 19 June 2019 Rovio Estimates

For the Games unit, we model 2019E-21E revenue using a bottom-up approach, whereas for 2022E-24E we apply a conservative steady growth rate of 5%. Moreover, we estimate that gross proﬁt will remain around 68% during the entire forecast period (2019-24). We base this on the current competitive situation in the platform market. On a group level, we model that revenue will grow at a CAGR of 7% during 2018-21E. Growth in operational expenses should remain in line with revenue growth, though we believe user acquisition costs will create upward pressure. Lastly, we expect the company to reach a 13% EBIT margin by 2021.

Games unit estimated to grow at a CAGR of 10% during 2018-21 Game unit's implied revenue For the Games unit, we base our 2019-21 revenue estimates on a bottom-up approach, CAGRs for 2018-21E and namely our forecasts for monthly average users (MAU), engagement (daily active users 2021E-24E are 10% and 5%, (DAU)-to-MAU ratio) and monetisation (average revenue per daily active user, respectively, in our bottom-up ARPDAU). Furthermore, we apply steady churn rates to estimate q/q retention in the approach MAU ﬁgure. In addition to Angry Birds Dream Blast, we expect the company to launch another game in H2 this year and forecast that it will launch two new games per year during 2020-21. We believe that the new games may raise both revenue and user acquisition costs, whereas we expect the more established titles to provide a steady, albeit declining, revenue stream. Using our bottom-up approach, we derive implied revenue CAGRs for 2018-21E and 2021E-24E of 10% and 5%, respectively.

We expect the gross margin in For our gross margin estimates, we adjust revenue for fees paid to app stores and sales the Games unit to remain agents. Even though we note that there is downward pressure on the platform fee (ie around 68% for the forecast the amount that platforms charge for hosting/selling the game to clients), we model a period constant cut of 30% for Apple and Google. Moreover, we expect sales agents' commissions to correspond to roughly ~2% of revenue. Consequently, we expect the gross margin to remain around 68% for the forecast period.

GAMES QUARTERLY GROSS BOOKINGS AND LTM, EURm GAMES REVENUE, ADJ. EBITDA AND MARGIN, EURm AND %

100 400 100 25% 90 350 90 80 80 20% 300 70 70 60 250 60 15% 50 200 50 40 150 40 10% 30 30 100 20 20 5% 10 50 10 0 0 0 0% Q1 17 Q1 17 Q2 17 Q3 17 Q4 18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 Q1 17 Q1 17 Q2 17 Q3 17 Q4 18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 Q2 19E Q2 19E Q3 19E Q4 20E Q1 20E Q2 20E Q3 20E Q4 21E Q1 21E Q2 21E Q3 21E Q4 Q2 19E Q3 19E Q4 19E Q1 20E Q2 20E Q3 20E Q4 20E Q1 21E Q2 21E Q3 21E Q4 21E Gross bookings - Total Rolling 12M - Total Revenue Adj. EBITDA Adj. EBITDA margin (%)

Source: Company data and Nordea estimates Source: Company data and Nordea estimates

Engagement and monetisation should remain good Rovio has demonstrated time and again that it can engage and monetise players. For instance, according to GameAnalytics, the median DAU-to-MAU and ARPDAU ﬁgures for more than 60,000 mobile games from June 2017 to June 2018 were 8% and USD 0.03, respectively. The corresponding ﬁgures for Rovio were 13% and USD 0.08 (EUR/ USD 1.12) on average for Q2 2016 to Q1 2019.

Marketing material commissioned by Rovio 12 19 June 2019 Rovio

DAU, MAU AND DAU-TO-MAU, MILLIONS AND % ARPDAU, EUR

90 16% 0.16 80 0.14 70 15% 0.12 60 0.10 50 14% 0.08 40 0.06 30 0.04 20 13% 0.02 10 0.00 0 12% Q1 17 Q1 17 Q2 17 Q3 17 Q4 18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 Q1 17 Q1 17 Q2 17 Q3 17 Q4 18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 Q2 19E Q2 19E Q3 19E Q4 20E Q1 20E Q2 20E Q3 20E Q4 21E Q1 21E Q2 21E Q3 21E Q4 Q2 19E Q3 19E Q4 19E Q1 20E Q2 20E Q3 20E Q4 20E Q1 21E Q2 21E Q3 21E Q4 21E DAU - All MAU - All DAU/MAU - All ARPDAU - All

Source: Company data and Nordea estimates Source: Company data and Nordea estimates

We do not expect any major changes to the current KPIs for the upcoming titles. We assume churn of 4% q/q in MAU figures and slightly improving engagement (ie the DAU/MAU ratio). In terms of monetisation, we believe the ARPDAU of the top-five games will increase by 1% q/q during 2019-21 and beyond, whereas we expect the rest of the game portfolio to grow 0-1% q/q. Overall, the company has disclosed that it intends to publish at least two titles per year in 2020 and 2021. It expects the second title this year to be Angry Birds POP 2, which had a soft launch in Q2 2019. More detailed estimates about Rovio's top-five games currently and its entire games portfolio are presented at the end of this section.

Angry Birds Movie 2 should boost revenue growth in Brand Licensing No investment or distribution Brand Licensing will receive a boost from the world premiere of Angry Birds Movie 2, costs associated with the Angry which will open in theatres globally in August 2019. Unlike the first movie, the sequel Birds sequel, as it has been has been licensed to Sony-owned Columbia Pictures Industries. This practically cuts licensed to Columbia Pictures out the financial risk, as Rovio does not need to invest in production or distribution. Industries Furthermore, the licensing model enables faster revenue recognition and the company expects to recognise ~50% of the total revenue during Q3-Q4 2019. Overall, we expect Brand Licensing to deliver ~50% revenue and ~65% EBITDA growth in 2019. We expect the movie sequel to grow both the content and product licensing businesses and boost organic downloads of games. Furthermore, for 2020E-21E, we model that product licensing revenue will decline at a pace corresponding to that of the two years following the first movie.

BRAND LICENSING REVENUE, ADJ. EBITDA AND MARGIN, EURm AND %

30 90% 80% 25 70% 20 60% 50% 15 40% 10 30% 20% 5 10% 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 17 17 17 17 18 18 18 18 19 19E 19E 19E 20E 20E 20E 20E 21E 21E 21E 21E

Revenue Adj. EBITDA Adj. EBITDA margin

Source: Company data and Nordea estimates

Hatch reflects one future gaming trend but the payoff is hard to estimate So far, Hatch has generated The Other segment consists of the group’s subsidiary Hatch Entertainment and zero revenue for Rovio expenses that are not allocated to other segments. Hatch, Rovio's 80%-owned subsidiary, is developing a cloud-based game streaming service for Android mobile devices and TVs. So far, Hatch has generated zero revenue for Rovio and the company is currently looking for external funding to boost the growth prospects of the service.

Marketing material commissioned by Rovio 13 19 June 2019 Rovio

In 2018, Hatch's operating expenses amounted to around EUR 7.3m. If Rovio's ownership of Hatch were below 50%, the company would not need to consolidate the unit's numbers on its balance sheet and income statement, which would reduce operating expenses and the asset base. The segment reported capex of EUR 1m for 2018. We expect the unit's expenses to amount to EUR 9.5m, EUR 7.0m and EUR 4.5m for 2019-21, respectively. We do not model any additional costs or investments in Hatch after 2021E. Though Rovio has recently announced collaboration initiatives with Vodafone in the UK and Samsung in the US, we do not assume any revenue from Hatch in our model. However, we derive a USD 45m back-of-the-envelope valuation for Hatch, which reflects the strategic value of the platform. The underlying assumptions for this calculation are shown in the table below.

ESTIMATE OF HATCH VALUE, USDm Global games market by 2021 174,000 % of mobile gaming 52% Global mobile gaming market by 2021 90,480 % of streaming 2% Global streamed mobile gaming 1,810 Hatch's market share 1% Hatch sales (USDm) 18 EV/Sales multiple 5 EV (USDm) 90 Net debt 0 Equity value 90 Rovio's expected ownership 50% Value of Hatch for Rovio in 2021 45 % of current market value 8%

Source: Nordea estimates and Newzoo

User acquisition costs drive the opex increase in 2019E We estimate user acquisition costs will rise from EUR 79m in 2018 to EUR 100m in 2019. Rising UA costs, reported under Other operating expenses, reflect our bullish view on the recently launched AB Dream Blast and the soft launch of AB Pop 2. However, we expect the movie sequel to boost the number of organic downloads of selected Angry Birds titles during Q3-Q4 2019. After 2019, we model UA costs will equal roughly 35-36% of the revenue generated by the Games unit over the forecast period (2020-24). Otherwise, we do not see any major cost pressure on a company level and forecast that opex will remain at ~55% of revenue.

COMPANY OPERATING EXPENSES BY SOURCE, EURm

0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 17 17 17 17 18 18 18 18 19 19E 19E 19E 20E 20E 20E 20E 21E 21E 21E 21E Materials and servives Employee benefits expense Other operating expenses

Source: Company data and Nordea estimates

Brand licensing business should boost full-year 2019 EBIT Upcoming Angry Birds Movie 2 We believe that the upcoming Angry Birds Movie 2, which is set for release in August will notably boost group EBIT 2019, will notably boost group EBIT through the content and consumer products' licensing businesses. We expect the company to exceed its guidance range of 9-11% adjusted operating proﬁtability and deliver a 12% margin for the full-year 2019. Furthermore, we forecast a similar margin throughout our explicit forecast period of 2019-21.

Marketing material commissioned by Rovio 14 19 June 2019 Rovio

Unlike the first movie, the sequel is licensed to Sony-owned Columbia Pictures Industries Inc., which bears the majority of the financial risk. However, Rovio's upside is limited to royalties, which we estimate to be 3% of total box office revenue during Q3- Q4 2019. Moreover, we expect the sequel to attract an audience similar to the first movie and forecast that it will pull in USD 350m in box office revenue. In addition to content licensing, the ramped-up consumer product licensing business should drive Rovio's profitability up.

With regards to the Games unit, we expect the adjusted operating margin to be 13% in 2019, just below the 2018 ﬁgure of 15%. We believe this margin decline will be caused by higher user acquisition costs (36% of games revenue), whereas we expect other costs to grow in line with revenue in 2019. Nonetheless, we believe user acquisition costs will level out after 2019 and should amount to 33% of games revenue during 2020-24.

Lastly, we do not model any revenue from the Other segment in our forecasts. In 2018, Hatch's operating expenses amounted to around EUR 7.3m. We expect Hatch-related expenses to amount to EUR 9.5m, EUR 7.0m and EUR 4.5m in 2019-21, respectively, after which point we do not model any costs from the unit. Historical and expected operating proﬁt excluding Hatch is presented below.

COMPANY OPERATIONAL PERFORMANCE, EURm AND %

100 25% 90 80 20% 70 60 15% 50 40 10% 30 20 5% 10 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 17 17 17 17 18 18 18 18 19 19E 19E 19E 20E 20E 20E 20E 21E 21E 21E 21E Revenue Adj. EBIT Adj. EBIT margin EBIT margin (excl. Hatch)

Source: Company data and Nordea estimates

Growing EPS, moderate payout ratio and solid liquidity We forecast EPS will double from EUR 0.31 to EUR 0.60 during 2018-24, which equals a CAGR of 12%. We believe this growth will be driven by revenue, while we assume proﬁtability and ﬁnancial costs will remain stable relative to revenue.

We see a high probability of The company paid annual dividends of EUR 0.06 for 2016-17 and EUR 0.09 for 2018-19. higher annual dividends Rovio's long-term goal is to distribute around 30% of annual adjusted net profit as equalling roughly one third of dividends and equity returns. Given the company's healthy business model, hefty cash the company's adjusted net position and limited capex needs in the next few years, we see a high probability of profit higher annual dividends equalling roughly one third of the company's adjusted net profit.

Considering our expectations for improving operating income, limited capex needs and a moderate payout ratio, we expect Rovio's cash position to remain solid throughout our forecast period. The company's ample liquidity lends it some flexibility in terms of game development, user acquisition and M&A. We note that these attributes are strategic beneﬁts in the mobile gaming industry and that they enable Rovio to sit in the driver's seat in a rapidly growing industry.

Marketing material commissioned by Rovio 15 19 June 2019 Rovio

DILUTED EPS, DIVIDEND AND PAYOUT RATIO, EUR AND % NET CASH AND GEARING, EURm AND %

0.70 35% 350 0% 0.60 30% 300 -20% 0.50 25% 250 0.40 20% 200 -40%

0.30 15% 150 -60% 0.20 10% 100 -80% 0.10 5% 50 0.00 0% 0 -100%

EPS, diluted DPS Payout ratio Net cash and equivalents Net gearing

Source: Company data and Nordea estimates Source: Company data and Nordea estimates

ESTIMATED KPIs FOR ROVIO'S TOP-FIVE GAMES CURRENTLY, MILLION AND % GAME KPIs Q1 19 Q2 19E Q3 19E Q4 19E Q1 20E Q2 20E Q3 20E Q4 20E Q1 21E Q2 21E Q3 21E Q4 21E AB2 Gross bookings 32.0 32.9 35.2 33.8 33.1 32.7 32.7 32.4 30.7 30.1 29.5 28.6 MAU 9.8 10.2 12.3 11.7 11.4 11.2 11.0 10.8 10.3 9.9 9.5 9.1 DAU/MAU 20% 20% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% DAU 2.02.02.22.12.12.02.01.91.91.81.71.6 ARPDAU (EUR) 0.18 0.18 0.17 0.17 0.18 0.18 0.18 0.18 0.18 0.19 0.19 0.19 AB Friends Gross bookings 7.26.36.66.36.15.95.85.65.25.04.84.5 MAU 2.22.12.22.12.01.91.81.81.71.61.51.4 DAU/MAU 20% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% DAU 0.40.40.40.40.40.30.30.30.30.30.30.2 ARPDAU 0.18 0.18 0.18 0.18 0.19 0.19 0.19 0.19 0.19 0.19 0.20 0.20 AB Dream Blast Gross bookings 6.9 11.3 13.4 12.9 12.6 12.5 12.5 12.4 11.7 11.5 11.3 10.9 MAU 2.13.84.64.44.34.24.14.03.93.73.63.4 DAU/MAU 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% DAU 0.40.80.90.90.90.80.80.80.80.70.70.7 ARPDAU (EUR) 0.18 0.16 0.16 0.16 0.16 0.16 0.17 0.17 0.17 0.17 0.17 0.17 AB Match Gross bookings 6.86.06.36.05.85.65.55.35.04.84.74.5 MAU 2.12.02.12.01.91.81.71.71.61.51.41.3 DAU/MAU 20% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% DAU 0.40.40.40.40.30.30.30.30.30.30.20.2 ARPDAU (EUR) 0.18 0.18 0.18 0.18 0.19 0.19 0.19 0.19 0.20 0.20 0.20 0.21 AB POP Gross bookings 3.32.72.92.82.72.62.52.52.32.22.22.1 MAU 1.00.91.00.90.90.80.80.80.70.70.60.6 DAU/MAU 20% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% DAU 0.20.20.20.20.20.10.10.10.10.10.10.1 ARPDAU (EUR) 0.18 0.19 0.18 0.19 0.19 0.19 0.19 0.19 0.20 0.20 0.20 0.21

Source: Company data and Nordea estimates

Marketing material commissioned by Rovio 16 19 June 2019 Rovio

ESTIMATED KPIs FOR THE WHOLE GAME PORTFOLIO, MILLION AND % GAME KPIs Q1 19 Q2 19E Q3 19E Q4 19E Q1 20E Q2 20E Q3 20E Q4 20E Q1 21E Q2 21E Q3 21E Q4 21E Bookings Gross bookings -TOP 5 565964626059595855545251 Gross bookings - All 66 67 73 71 76 74 81 79 82 80 86 83 Rolling 12M - TOP5 223 227 237 241 245 245 240 236 231 226 219 212 Rolling 12M - All 261 263 273 277 287 294 302 311 317 323 328 331 User amount DAU - TOP 5 3.53.74.13.93.83.73.63.53.33.23.12.9 DAU -All 7.06.67.06.76.96.76.96.76.86.46.56.2 MAU - TOP 5 17.1 19.0 22.1 21.0 20.5 20.0 19.5 19.0 18.2 17.3 16.6 15.8 MAU - All 49.3 48.0 51.1 48.7 49.1 47.4 48.2 46.5 46.5 44.0 44.2 41.9 Engagement DAU/MAU - TOP 5 20% 19% 18% 18% 18% 18% 18% 18% 18% 18% 18% 18% DAU/MAU - All 14% 14% 14% 14% 14% 14% 14% 14% 15% 15% 15% 15% Retention MAU retention - TOP5 95% 111% 116% 95% 98% 98% 98% 98% 96% 96% 96% 96% MAU retention - All 98% 97% 106% 95% 101% 97% 102% 96% 100% 95% 100% 95% Conversion MUP - TOP 5 0.40.50.50.50.50.50.50.50.40.40.40.4 MUP - All 0.50.50.50.50.50.50.50.50.50.40.40.4 Conversion rate (TOP5) 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Conversion rate (All) 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Monetization ARPDAU - TOP 5 0.18 0.18 0.17 0.17 0.18 0.18 0.18 0.18 0.18 0.18 0.19 0.19 ARPDAU - All 0.10 0.11 0.11 0.12 0.12 0.12 0.13 0.13 0.14 0.14 0.14 0.14 MARPPU - TOP 5 39.0 42.0 39.3 39.7 39.7 40.1 40.9 41.3 40.9 41.8 42.7 43.2 MARPPU - All 38.5 46.6 47.3 48.1 51.3 52.0 55.9 56.7 58.8 60.4 64.5 65.5

Source: Company data and Nordea estimates

Negative consensus estimate revision trend since IPO Consensus estimate revisions have been negative since the IPO in September 2017. Estimates were downgraded sharply in February 2018 when Rovio published its Q4 2017 ﬁnancials and provided guidance for 2018. The main reason has been that so far Rovio has not delivered on its long-term ﬁnancial goals from 2016, of growth above that of the Western mobile gaming market (~10%) and a 30% EBIT margin.

SALES: CONSENSUS ESTIMATES, EURm EBIT: CONSENSUS ESTIMATES, EURm

500 120

450 100 80 400 60 350 40

300 20

250 0 Nov Jan Mar May Jul Sep Nov Jan Mar May Nov Jan Mar May Jul Sep Nov Jan Mar May 17 18 18 18 18 18 18 19 19 19 17 18 18 18 18 18 18 19 19 19 FY2018 FY2019 FY2020 FY2018 FY2019 FY2020

Source: Thomson Reuters Source: Thomson Reuters

Marketing material commissioned by Rovio 17 19 June 2019 Rovio

EBIT MARGIN: CONSENSUS ESTIMATES, % EPS REVISIONS AND NUMBER OF ESTIMATES

25% 35 30 25 20% 20 15 15% 10 5 0 10% -5 -10 -15 5% -20 Nov Jan Mar May Jul Sep Nov Jan Mar May J S D 17 M J S D 18 M 30d 17 18 18 18 18 18 18 19 19 19 0% FY2018 FY2019 FY2020 Upward Downward Num Ests

Source: Thomson Reuters Source: Thomson Reuters

Our estimates are ahead of consensus on growth but below on margins The Thomson Reuters consensus currently expects decelerating growth and an improving EBIT margin for 2020-21. We believe that Rovio will be able to remain on its growth path and forecast a lower EBIT margin than consensus. Consensus expects sales to grow by 13% in 2019 (-5% in 2018), while estimates for 2020 and 2021 are at 7% and -1%, respectively. We estimate sales will grow 12% in 2019, while our 2020 and 2021 estimates are at 6% and 4%, respectively. Along with slowing sales growth estimates, consensus expects the EBIT margin to improve from 10% in 2019 (11% in 2018) to 21% in 2021. We estimate that Rovio will deliver an EBIT margin of 12% (15% excluding Hatch) in 2019, expanding only slightly to 13% (14% excluding Hatch) in 2021.

ROVIO ENTERTAINMENT: OUR ESTIMATES VS CONSENSUS Nordea estimates Consensus estimates Difference EURm Q2 2019E 2019E 2020E 2021E Q2 2019E 2019E 2020E 2021E Q2 2019E 2019E 2020E 2021E Sales 71.5 315.1 332.6 346.7 74.5 319.0 342.0 338.0 -4% -1% -3% 3% EBITDA 6.5 50.2 50.1 51.3 7.0 46.0 67.0 75.0 -7% 9% -25% -32% EBITDA margin 9% 16% 15% 15% 9% 14% 20% 22% -0.3pp 1.5pp -4.5pp -7.4pp EBIT 2.8 37.2 40.3 44.1 4.0 33.0 54.0 70.0 -29% 13% -25% -37% EBIT margin 4% 12% 12% 13% 5% 10% 16% 21% -1.4pp 1.4pp -3.7pp -8.0pp Adj. EBIT (Excl. Hatch) 5.4 46.6 47.2 48.6 4.0 33.0 54.0 70.0 -29% 13% -25% -37% Adj. EBIT margin (Excl. Hatch) 8% 15% 14% 14% 5% 10% 16% 21% 2.2pp 4.4pp -1.6pp -6.7pp PTP 2.8 37.3 40.2 44.1 6.0 33.0 54.0 70.0 -53% 13% -25% -37% EPS 0.03 0.37 0.40 0.44 0.03 0.32 0.52 0.68 14% 17% -22% -35% Adj. EPS 0.03 0.37 0.40 0.44 0.03 0.32 0.52 0.68 14% 17% -22% -35% DPS 0.11 0.12 0.13 0.10 0.16 0.17 17% -23% -25%

Source: Thomson Reuters and Nordea estimates

Marketing material commissioned by Rovio 18 19 June 2019 Rovio

Reported numbers and estimates

REPORTED QUARTERLY NUMBERS AND ESTIMATES, EURm AND %

Company Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19E Q3 19E Q4 19E Revenue 668671746672717371719083 Materials and services 19 20 21 22 18 21 21 20 20 21 24 23 Employee benefits expense 13 14 11 14 11 10 10 11 910911 Other operating expenses 24 23 33 24 22 32 26 33 31 33 36 36 EBITDA 10 30 6 14 14 9 15 9 11 62012 Adj. EBITDA 10 32 9 14 15 9 15 9 11 62012 EBIT 5142109610683179 Adj. EBIT 516411 10610583179 Adj. EBIT (excl. Hatch) 6 15 3 12 10 8 12 9 9 5 19 12 PTP 513-1109710683179 Net Profit 410-18758462137 EPS, diluted 0.05 0.13 -0.01 0.10 0.09 0.07 0.10 0.05 0.07 0.03 0.17 0.09 DPS Payout ratio 0%0%0%0%0%0%0%0%0%0%0%0% Adj. EBITDA margin 15% 37% 12% 19% 22% 13% 21% 12% 15% 9% 22% 15% Adj. EBIT margin 8% 19% 6% 14% 15% 8% 15% 7% 11% 4% 19% 11% Adj. EBIT margin (excl. Hatch) 10% 18% 4% 16% 16% 10% 17% 12% 13% 8% 21% 14%

Source: Company data and Nordea estimates

REPORTED ANNUAL NUMBERS AND ESTIMATES, EURm AND % CAGR CAGR Company 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 18-21E 21E-24E Revenue 297 281 315 333 347 360 376 393 5% 4% Materials and services 82 80 88 97 103 108 114 119 7% 5% Employee benefits expense 52 43 40 40 39 40 40 41 -2% 1% Other operating expenses 104 112 137 145 152 152 158 166 8% 3% EBITDA 60 48 50 50 51 60 63 66 2% 9% Adj. EBITDA 65 48 50 50 51 60 63 66 2% 9% EBIT 31 32 37 40 44 55 59 63 9% 12% Adj. EBIT 36 31 37 40 44 55 59 63 9% 12% Adj. EBIT (excl. Hatch) 36 39 47 47 49 55 59 63 6% 4% PTP 27 32 37 40 44 55 59 63 8% 12% Net Profit 21 25 30 32 36 44 47 50 10% 12% EPS, diluted 0.27 0.31 0.36 0.39 0.43 0.54 0.58 0.62 9% 13% DPS 0.06 0.09 0.11 0.12 0.13 0.16 0.17 0.19 10% 13% Payout ratio 22% 29% 31% 31% 30% 30% 30% 30% Adj. EBITDA margin 22% 17% 16% 15% 15% 17% 17% 17% Adj. EBIT margin 12% 11% 12% 12% 13% 15% 16% 16% Adj. EBIT margin (excl. Hatch) 12% 14% 15% 14% 14% 15% 16% 16% Net cash and equivalents 88 120 158 188 218 253 287 323 Net gearing -63% -75% -87% -91% -94% -95% -96% -96%

Source: Company data and Nordea estimates

Marketing material commissioned by Rovio 19 19 June 2019 Rovio Rovio's market

Rovio operates in three main entertainment markets: mobile gaming, brand & character licensing, and movies. Because Rovio is a games-ﬁrst entertainment company, we take a deep dive into the gaming industry in this section, and then introduce the large but mature markets of brand licensing. We take a look at the gaming market as a whole to understand its signiﬁcant growth history and potential. We believe that mobile gaming is the fastest-growing segment of the gaming market, but this market segment also faces the toughest competition and has the highest user acquisition costs (UAC). According to the mobile marketing platform, Liftoff, paying users in the mobile gaming segment generate average revenue of USD 70 over 90 days, while the cost of acquiring a paying customer was USD 102 in 2018. However, the average lifetime value (LTV) of truly engaged gamers exceeds the 90-day average revenue, as gamers continue to spend money on the games for prolonged periods. Rovio uses a 12-month payback time for its UA investment decisions.

Games segment's market overview Gaming is now the largest The global gaming market has grown substantially in recent years. In 2018, it entertainment industry in the generated around USD 135bn, rendering it the largest industry in the entertainment world business measured in revenue terms. It also marked the ﬁrst year ever that revenue from the video game industry surpassed that of the movie industry. Gaming market research provider, Newzoo, forecasts a CAGR of 9.3% for the global gaming market in 2017-21, expecting growth to stem from a larger customer base and a higher willingness to spend.

GLOBAL GAMING REVENUE, USDbn

200 25% 180 160 20% 140 120 15% 100

USDbn 80 10% 60 40 5% 20 0 0% 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E Global gaming market revenue Growth Y/Y

Source: Newzoo estimates

Gaming market by geography North America had the largest North America, along with Europe, the Middle East, and Africa, enjoyed the greatest growth rate in 2018 growth y/y in 2018. Measured in revenue, China has the biggest market share. Combined with the rest of the APAC region, China accounted for around half of the total global gaming revenue generated in 2018. It goes without saying that China is an interesting market, offering a lucrative opportunity for western gaming companies, especially due to its large player base. North America and EMEA account for roughly 25% and 22% of total global gaming revenue, respectively, while Latin America, with a large player base, still lags signiﬁcantly in terms of revenue, as it has less than a 4% market share.

Marketing material commissioned by Rovio 20 19 June 2019 Rovio

GLOBAL GAMING REVENUE BY REGION, 2018 GLOBAL GAMING REVENUE GROWTH BY REGION, 2018

EMEA LATAM 16% 22% 4% 14% 14% 13% 12% 11%

10% 8% NAM 25% 8% 6% China 4% 25% 2% 0% APAC ex. Growth y/y China 24% EMEA LATAM NAM APAC

Source: Newzoo estimates Source: Newzoo estimates

According to Newzoo, there are a total of 2.2 billion gamers or gaming enthusiasts globally, ie 1.1 billion excluding APAC. Newzoo deﬁnes a gamer as anyone who has installed a game on their smartphone, inflating the number of players who likely account for a decent share of the wallet.

Asia-Paciﬁc is the biggest As mentioned earlier, the strong growth in the gaming market can be explained by region measured by number of fundamental factors, such as a growing population and continuous online penetration. gamers China is the largest country in terms of revenue, followed by the US, Japan, South Korea, and Germany. We argue that there is more to give in terms of growth, however, as online penetration of countries such as China and India has not yet reached the same levels as in western countries, where online penetration is above or around 90% of the population. With online penetration of 60% for China, and as low as 30% for India and Indonesia, around 1.6 billion people are still 'unconnected', meaning the potential for further growth in the gaming market is enormous.

LARGEST COUNTRIES IN TERMS OF GAMING REVENUE, USDm ONLINE POPULATION AND PENETRATION, MILLIONS

40,000 1 600 120%

35,000 1 400 100% 30,000 1 200 80% 25,000 1 000 800 60% 20,000 Millions USDm 600 15,000 40% 400 10,000 20% 200 5,000 0 0% 0

Total Revenue Population Online Population Online Penetration

Source: Newzoo estimates Source: Newzoo estimates

Gaming market by segment Mobile gaming accounted for a At 48%, mobile gaming accounted for the largest share of the global gaming market's whopping 48% of global revenue in 2018. With 2.2 billion players worldwide, smartphone and tablet games gaming revenue in 2018 together generated revenue of more than USD 63bn during 2018. This represented steady growth y/y, with smartphone and tablet revenue for the year increasing by 14% and 11%, respectively.

The future is not as bright for Breaking down total revenue by platform, Newzoo estimates that smartphones and browser gaming tablets will experience solid growth during 2017-21. It also forecasts that gaming revenue generated through smartphones will grow the fastest in this period, at a CAGR of 14.4%, while it expects tablet revenue to grow by 7.1% during the same period. Newzoo also forecasts that the overall global gaming market will grow at an annual pace of 9.3% up until 2021, but it expects the worst for browser games, at a CAGR of -19.1%.

With the rise of multi-platform gaming and streaming, the lines between platforms will become increasingly blurred in the future and revenue/statistics may not be categorised in the same way as they are today.

Marketing material commissioned by Rovio 21 19 June 2019 Rovio

GLOBAL GAMING REVENUE BY SEGMENT, USDbn

200 174.0 180 160.5 2 148.1 16 160 134.9 3 121.7 3 16 140 4 15 33 32 120 5 13 12 31 100 30 47 28 43 80 41 38 60 33

40 75 58 66 20 44 50 0 2017 2018 2019E 2020E 2021E Smartphone Console PC Tablet Browser

Source: Newzoo estimates

REVENUE CAGR PER SEGMENT, 2017-21E

20% 14.4% 15% 9.3% 9.6% 10% 7.1% 4.5% 5%

-5%

-10%

-15%

-20% -19.1% -25% Total market Smartphone Console PC Tablet Browser

Source: Newzoo estimates

Mobile gaming Mobile gaming set to grow the Rovio operates in the mobile gaming market (smartphone and tablet games). Newzoo most in the next few years, estimates that mobile gaming will generate total global revenue of USD 91bn by 2021, according to Newzoo representing a CAGR of ~13% during 2017-21. The rapid increase in the number of smartphone users around the world has been one of the main drivers behind the solid mobile gaming growth in recent years. Smartphone user growth is being driven by the APAC region, with India leading the pack. Newzoo forecasts a CAGR of 17% for the APAC region during 2018-21.

GLOBAL MOBILE GAMING REVENUE, USDbn GLOBAL SMARTPHONE USERS BY REGION, MILLIONS

100 91 4000 90 82 3500 80 73 70 63 3000 56 60 2500 50 41 2000 40 31 25 1500 30 18 13 20 1000 10 0 500

0 2016 2017 2018 2019E 2020E 2021E Mobile Gaming China India Asia Pacific ex. IND and CHN Middel East & Africa Source: Newzoo estimates Eastern Europe Western Europe Latin America North America

Source: Newzoo estimates

Marketing material commissioned by Rovio 22 19 June 2019 Rovio

Monetisation of mobile games The most widely used According to a 2017 survey by AdColony, in which the respondents were mostly gaming monetisation methods for developers (90%), the top-three most common methods for monetising apps are video mobile are video ads, in-app ads, in-app purchases (IAP), and display ads. Self-reported use of these methods was purchases, and display ads 100%, 91% and 80%, respectively.

These three methods account for 90% of total revenue generated in the mobile apps industry. In-app purchases account for an impressive 39% of revenue generated. In the context of mobile gaming, this could involve purchasing in-game currencies, boosts, timed promotions, themes etc.

MONETISATION TYPE: FREQUENCY OF USE IN MOBILE APPS REVENUE PER MONETISATION TYPE IN MOBILE APPS

120% Video Ads 100% 31% 100% 91% 80% 80% Other 60% 43% 36% 5% 40% 27% 25% 23% Native Ads 20% 5% 0%

In-app Purchases Display Ads 39% 20%

Source: AdColony (Mobile Publishing Survey, 2017) and Nordea Source: AdColony (Mobile Publishing Survey, 2017) and Nordea

In-app purchases are more The survey also shows considerable differences in how gaming apps monetise their predominant in gaming than in apps relative to other non-gaming apps. Free-to-play games represent another general other mobile apps trend in the industry, whereby developers generate revenue for their free games by offering special features and exclusive content for players who are willing to spend extra. The gap can also be explained by the natural integration of in-game transactions, where the purchase value is immediate and obvious for gamers.

REVENUE % PER MONETISATION, MOBILE GAMING REVENUE % PER MONETISATION, OTHER APPS In-app Purchases & mCommerce Video Ads 21% 31% Video Ads In-app 36% Purchases & mCommerce 43%

Other 4% Other Native Ads Display Ads 3% 3% 30% Display Ads Native Ads 19% 10% Source: AdColony (Mobile Publishing Survey, 2017) and Nordea Source: AdColony (Mobile Publishing Survey, 2017) and Nordea

Casual games generate the majority of Rovio's revenue Delving deeper into mobile gaming revenue and how it is split, we ﬁnd that the puzzle and slingshot subcategories – Rovio's main focus – rely heavily on In-app-advertising (IAA). According to data from mobile marketing analytics and attribution platform AppsFlyer, casual games generate 31-58% of their revenue from IAA as opposed to IAP. In this sense, Rovio could increase its share of advertisement revenue as it generated 11% of its revenue through IAA in 2018. However, Rovio's game portfolio is diverse, and includes games from the mid-core and strategy genre too, but the top-ﬁve grossing games belong to the casual category at the moment.

Marketing material commissioned by Rovio 23 19 June 2019 Rovio

REVENUE SPLIT, CASUAL MOBILE GAMES REVENUE SPLIT, MID-CORE AND STRATEGY MOBILE GAMES

100% 100% 90% 90% 31% 26% 30% 28% 28% 28% 30% 80% 35% 80% 48% 70% 56% 58% 56% 70% 60% 60% 50% 50% 40% 40% 74% 72% 72% 72% 69% 70% 70% 30% 65% 30% 52% 20% 44% 42% 44% 20% 10% 10% 0% 0% Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 IAP IAA IAP IAA

Source: AppsFlyer (The state of Gaming App Marketing, 2018) and Nordea Source: AppsFlyer (The state of Gaming App Marketing, 2018) and Nordea

Customer revenue in mobile gaming In mobile gaming, 10% of The revenue distribution across gamers in the industry is highly concentrated. Based on customers generate 90% of the a sample of ~400,000 gamers, Rakuten Intelligence reports that 10% of mobile gamers revenue generates around 90% of total gaming revenue, while the top 1% account for a whopping 58% of revenue.

The chart below depicts the nature of mobile gaming market. Because games are free to download and an average player does not spend money on IAPs, most of the players do not generate any meaningful revenue for the gaming companies. According to player analysis platform GameAnalytics, the daily conversion rate, ie the percentage of players that convert to paying users each day, is only 1.2% for the top converting games, while the median daily conversion rate is below 0.4%. This leads to a market where a very small percentage of gamers generate the bulk of total revenue.

SPEND DISTRIBUTION BY PERCENTAGE OF MOBILE GAMERS

100%

80%

60%

40% % of Revenue %

20%

0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of Users Source: Rakuten Intelligence (2016) and Nordea estimates

The median 90-day average Average revenue per paying customer (ARPPU) is one of the core KPIs in the industry. revenue per paying customer in The metric is used to measure the small segment of customers that contribute to gaming is USD 70.3, although revenue in the industry. According to AppsFlyer, for both organic customers (acquired 90 days is a relatively short through app store searches) and non-organic customers (acquired through time to measure the LTV of advertisements), the 90-day average revenue per paying user is USD 70.3. engaged gamers However, the games-as-a-service business model has become increasingly popular in the mobile gaming industry, which leads to longer lives of games. The best games are able to engage their gamers for multiple years. Thus, the true LTV of engaged gamers is distributed across a prolonged period of time in, for example, games with skilled, live operations teams that continue to add new and interesting content to keep the players engaged. For example, Rovio uses a 12-month payback time for its return on investment calculations when it plans UA investments.

Marketing material commissioned by Rovio 24 19 June 2019 Rovio

Organic users spend more Isolating only non-organic customers, we see values from USD 49.3 to USD 25.7 money than non-organic users, depending on the country, as the graph below shows. This implies that organic users which is positive for Rovio, as generate notably higher revenue than non-organic users on average. This is positive for its Angry Birds IP attracts Rovio as the company has a large organic user base bolstered by the global Angry organic downloads Birds brand.

NON-ORGANIC AVERAGE REVENUE PER PAYING USER, USD

Source: AppsFlyer (2018 LTV Benchmarks)

Across the whole user base, the Looking at the total user base (ie both paying and non-paying customers), AppsFlyer average revenue is USD 1.7 per reports a 90-day average revenue per user (ARPU) of USD 1.7 for organic and non- customer organic traffic. Below, we outline AppsFlyer's data for average non-organic users only, noting that the US and UK markets are above the other major markets. The global average is reported to be USD 1.31 per non-organic user.

NON-ORGANIC REVENUE PER USER (AVERAGE OF ALL USERS), USD

Source: AppsFlyer (2018 LTV Benchmarks)

The winner takes it all with the According to GameAnalytics, which enables the tracking, analysis, and reporting of game top performers accounting for metrics, the median purchase volume for the mobile industry is around USD 7, while the top the lion's share of revenue 15% of companies report an average of USD 25 and the bottom 15% report an average of USD 2 per customer. The large gap between the top performers and the median value illustrates the winner-takes-all nature of the industry, as it seems most of the revenue is concentrated at the top.

Customer acquisition costs Customer acquisition cost (CAC) is one of the core KPIs for e-businesses. As the name suggests, it is the cost associated with acquiring a new customer. As digital companies

Marketing material commissioned by Rovio 25 19 June 2019 Rovio

can proactively target their marketing campaigns, CAC is a useful tool that can be used to track the efficiency and effectiveness of marketing efforts. Subtracting the CAC from the customer's lifetime value (LTV) gives the ROI per user, which, for example, drives investment decisions for each game.

Rovio's games are usually easy In the context of mobile games, the acquisition cost is divided into the three stages of to pick up and play, so the customer engagement: installation, registration, and in-app purchasing. In 2018, registration step is not too acquisition costs in terms of installation and registration were down 24% and 42%, relevant for Rovio respectively, compared with 2017. When acquiring in-app-purchasing (IAP) customers in the industry (which is the critical stage for monetising mobile games), however, the cost rises from USD 76 up to USD 102, representing a 33% increase. The negative trend continues in the engagement rates for the industry, with Liftoff reporting that only ~3% of total customers were willing to make in-app purchases in 2018 compared with 5% the previous year.

MOBILE GAMES: CUSTOMER ACQUISITION COSTS, USD MOBILE GAMES: CUSTOMER ENGAGEMENT RATES, %

120 60% 57.1% 101.6 50% 100 44.1% 43.2% 76.4 80 40% 65.9 60 30% USD 40 20%

20 9.4 8.9 10% 6.3% 5.0% 4.1 3.8 2.9 5.1 2.9% 0 0% Install Register In-App-Purchase Register In-App-Purchase 2016 Axis2017 Title2018 2016 2017 2018

Source: Liftoff (2018 Mobile App Engagement Index) and Nordea Source: Liftoff (2018 Mobile App Engagement Index) and Nordea

High demand for mobile ads We believe increased advertising prices can be expected, as the high segmentation and will lead to higher advertising competitiveness in the market, which have only accelerated in the past few years, are prices, we believe generating high demand for mobile ads. For example, App Annie, which provides global app market data, reports that in 2017, the cumulative number of apps released amounted to 4.5 million, 77% of which were gaming apps.

Efficient customer acquisition The substantial growth in the number of gaming apps underlines the need for Rovio strategy is key; this requires and other publishers to stand out from the crowd with efficient customer acquisition adequate cash, especially strategies. To ensure this, companies require sufficient headroom in terms of cash during game launch position, especially during the launch phase of new games. We see that Rovio is in a good position to launch new games with its solid expertise in user acquisition and strong balance sheet with a cash position of EUR 128.8m at the end of Q1 2019.

APPS RELEASED ON iOS APP STORE WORLDWIDE NON-ORGANIC INSTALLS PER CATEGORY, %

5 4.5 Hyper Casino Casual 5% 3.8 6% 4

2.8 3 2.1 Midcore & Millions 2 1.5 Strategy 1.1 Casual 52% 0.7 1 0.4 37% 0.0 0.2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Game Apps Other Apps

Source: App Annie (2018) and Nordea estimates Source: AppsFlyer (The state of Gaming App Marketing, 2018) and Nordea

Below, we show the monthly trend for the acquisition cost of in-app-purchasing customers, based on Liftoff data for the whole mobile industry. We see an identical trend for the isolated gaming data, with IAP costs on the rise and engagement rates decreasing.

Marketing material commissioned by Rovio 26 19 June 2019 Rovio

MONTHLY IN-APP-PURCHASING CAC AND ENGAGEMENT RATES, USD

140 128 5.0% 119 4.5% 120 4% 113 111 113 101 4.0% 4% 98 100 91 90 93 3.5% 3% 3% 3% 3% 3% 3.0% 80 69 61 3% 3% 3% 2.5% USD 60 2% 2% 2.0%

40 1.5% 1.0% 20 0.5% 0 0.0%

IAP Cost Engagement Rate

Source: Liftoff (2018 Mobile App Engagement Index) and Nordea

Acquiring a paying customer is Below we show the acquisition cost trends for the past three years for the major mobile becoming cheaper for most app categories. For installation and registration, it seems that the gaming subcategory industries, but not for gaming is following the general trend in the market, ie prices are dropping. The cost of acquiring paying customers, however, is showing a decline, which is not visible in the gaming vertical.

INSTALL: USER ACQUISITION COST REGISTER: USER ACQUISITION COST PAYMENT: USER ACQUISITION COST

7 25 150 6 20 5 100 4 15 USD USD USD 3 10 2 50 5 1 0 0 0

2016 2017 2018 2016 Axis2017 Title2018 2016 2017Axis Title2018

Source: Liftoff (Mobile Engagement Index) and Nordea Source: Liftoff (Mobile Engagement Index) and Nordea Source: Liftoff (Mobile Engagement Index) and Nordea

There are signiﬁcant cost In terms of regional differences, we ﬁnd considerable variations in acquisition costs, differences across geographical highlighting the different geographical dynamics. For example, in the APAC region, we markets see an impressive 99% penetration rate for registered users and the lowest installation and registration costs compared with other regions. Users willing to make in-app purchases in the region are the most expensive to acquire and represent only ~2% of the total user base.

MOBILE CUSTOMER ACQUISITION COST PER REGION, USD MOBILE ENGAGEMENT RATES PER REGION

105.5 4% 91.9 3% In-App Purchase In-App Purchase 83.7 3% 110.0 2% 6.9 56% 4.8 51% Register Register 3.4 74% 1.6 99% 3.9 2.5 Install Install 2.5 1.6

0 20406080100120 0% 20% 40% 60% 80% 100% NAR LATAM EMEA APAC NAR LATAM EMEA APAC

Source: Liftoff (2018 Mobile App Engagement Index) and Nordea Source: Liftoff (2018 Mobile App Engagement Index) and Nordea

Marketing material commissioned by Rovio 27 19 June 2019 Rovio

Global licensing market According to LIMA, the licensing industry’s global association, global retail sales of licensed merchandise and services reached USD 271.6bn in 2017, representing growth of 3.3% from the previous year. Altogether, the global licensing industry has grown at a CAGR of 4.0% during 2014-17.

GLOBAL LICENSING INDUSTRY REVENUE, USDbn, AND GROWTH, %

275.0 5.0% 270.0 4.5% 265.0 4.0% 260.0 3.5% 255.0 3.0% 250.0 2.5% 245.0 2.0% 240.0 1.5% 235.0 1.0% 230.0 0.5% 225.0 0.0% 2014 2015 2016 2017 Global licensing industry revenue Growth y/y

Source: LIMA, Annual Global Licensing Industry Survey 2015-2018

Character & Entertainment licensing is the relevant segment for Rovio The licensing industry can be divided by product category. According to the 2015 survey of LIMA, entertainment and character licensing is the largest licensed product category, with a 44% share of total licensing revenue, followed by corporate trademark licensing with a 22% share in 2014.

As Rovio licenses its Angry Birds brand for movies and a variety of different consumer products, the relevant segment for the company is the character and entertainment licensing segment. The segment boasted revenue of USD 121.5bn in 2017, representing a 44.7% share of the licensed retail market. During 2014-17, entertainment and character licensing grew at a CAGR of 4.3%, slightly faster than the whole licensing market.

According to Rovio, brand licensors typically receive approximately 6% of the retail sales as royalties. The size of the character and entertainment licensing market was USD ~7.3bn in 2017, calculated in terms of reported royalties received by licensors such as Rovio, when assuming the 6% royalty rate. The market is dominated by global brands with high brand awareness, and building new brands is expensive and time- consuming. Currently, Disney accounts for a major share of all the royalties received by the segment.

SALES OF LICENSED GOODS BY PROPERTY TYPE, 2014 ENTERTAINMENT & CHARACTER LICENSING REVENUE AND ROYALTY INCOME Publishing Other 5% 6% Entertainment & 140.0 character Sports 44% 120.0 10% 100.0

80.0

Fashion 60.0 13% 40.0

20.0 6.4 6.8 7.1 7.3 Corporate trademarks 0.0 22% 2014 2015 2016 2017 Character & entertainment licensing Royalties with 6% royalty rate Source: LIMA, Annual Global Licensing Industry Survey 2015 Source: LIMA, Annual Global Licensing Industry Survey 2015-18

Marketing material commissioned by Rovio 28 19 June 2019 Rovio

North America and EMEA account for the majority of global licensed revenue, but China and the rest of Asia are growing at the fastest rate. When looking at sales of licensed goods by product category, we ﬁnd that apparel led all other categories in 2017 with USD 40.7bn in revenue, accounting for 15% of total sales. Apparel was followed by toys at USD 36.1bn (13.3%) of revenue.

Altogether, the global licensing market is large and mature, with slow but steady growth prospects. The proﬁtability of the licensing business is commonly attractive, however, because the licensing business normally has a low cost base. We believe Rovio is in a good position to increase its Brand Licensing unit's sales in the near future, supported by the launch of the new movie and its strong licensing partner network.

Marketing material commissioned by Rovio 29 19 June 2019 Rovio Rovio in brief

Founded in 2003, Rovio operates in the global entertainment market as a creator, developer and publisher of mobile games. In addition, the company conducts licensing business in various entertainment categories. Rovio is best known for its Angry Birds brand, which started from a popular mobile game in 2009 and expanded to include multiple other games, animated series, movies, activity parks and various consumer products. Rovio employs 422 people in Finland and Sweden and operates through two segments: Games and Brand Licensing.

Angry Birds brand is the soul of Rovio Angry Birds brand celebrates Angry Birds is a global brand with high worldwide awareness. According to a survey its tenth anniversary in 2019, conducted by Lieberman Research Worldwide in 2017, Angry Birds enjoys very high which will culminate in the brand awareness of 97% globally. Having been around since 2009, the Angry Birds release of Angry Birds Movie 2 brand has proven its longevity: according to Rovio, 70 million licensed Angry Birds in September 2019 products of various kinds were sold in 2018 alone. In addition to this, the Angry Birds games have been downloaded 4.5 billion times so far.

Even though Rovio is a games-ﬁrst entertainment company, it has utilised Angry Birds in its Brand Licensing segment too. The Brand Licensing segment consists of two subsegments: Content Licensing and Consumer Products. The Content Licensing subsegment licenses the Angry Birds brand for producers of digital content, such as movies, while the Consumer Products unit licenses the brand for producers of physical products, eg toys, candy and other merchandise.

Angry Bird brand's 10th anniversary culminates in release of new movie Initiatives planned to enhance In May 2016, Rovio released The Angry Birds Movie in 88 counties. The movie was top the presence of Angry Birds on of the box office in 50 countries on opening weekend, including the US and China. The digital platforms movie generated box office revenue of over USD 350m globally. Currently, Rovio's partner Columbia Pictures is preparing to launch Angry Birds Movie 2. The sequel will be released in September this year. We note that in 2017 Rovio adopted a new licensing-based business model for movies to decrease the need for capital expenditure and to reduce its business risk. The sequel has been licensed to Sony- owned Columbia Pictures Industries, which is also responsible for the marketing, production and distribution of the movie. While this move significantly reduces Rovio's financial risks compared with the first movie, it also cuts Rovio's revenue potential, as Rovio will only receive royalties from the proceeds that Columbia Pictures generates. However, the movie will boost brand awareness, and we expect this to have a positive impact on revenue through both the Games and Brand Licensing business units.

In addition, Rovio is planning to introduce new initiatives in the future, such as the ﬁrst long-form animation series for TV (expected to be launched in 2020) and other new content to enhance the presence of Angry Birds on digital platforms such as the official Angry Birds YouTube channel.

ROVIO'S ANGRY BIRDS BRANDED OFFERING Games Movies Merchandise

Source: Company images

Marketing material commissioned by Rovio 30 19 June 2019 Rovio

Games is the main business segment Games accounted for ~89% of In 2018, the Games segment generated EUR 250.4m in sales, which represents ~89% of total group sales in 2018 total group sales, while the Brand Licensing segment generated EUR 30.8m, representing ~11% of revenue. The Other segment consists of Rovio's subsidiary Hatch Entertainment, and this segment has not yet generated revenue.

The Games segment also generates most of Rovio's proﬁts, delivering adjusted EBIT of EUR 38.7m in 2018, which represents an adjusted EBIT margin of 15.4%. However, when comparing the proﬁtability of the two segments, Brand Licensing has a notably higher adjusted EBIT margin of 22.8%.

REVENUE BY SEGMENT, EURm ADJ. EBIT BY SEGMENT, EURm

350.0 50.0

300.0 40.0

250.0 30.0

200.0 20.0

150.0 10.0

100.0 0.0

50.0 -10.0

0.0 -20.0 2016 2017 2018 2016 2017 2018 Games Brand Licensing Other Games Brand Licensing Other

Source: Company data and Nordea estimates Source: Company data and Nordea estimates IAPs accounts for the lion's Analysing Rovio's revenue streams further, we note that 89% of the Games segment's share of Games' revenue... revenue comes from in-app purchases (IAP), while 11% is generated from advertising. IAPs are extra services or subscriptions that users can buy in apps on mobile devices. In the case of Rovio, IAPs may include extra content, virtual currency or more time to play. Advertising revenue is generated by displaying advertisements against a fee. The advertisements are shown in a "movie theatre" within the game, so that players can go and watch advertisements to gain free virtual goods.

...while Content Licensing Consumer Products accounted for 28% of the Brand Licensing segment's sales in 2018. generates 72% of revenue in The sales are generated through hundreds of partners who produce AB branded the Brand Licensing segment goods. The licensees pay a royalty on each item sold. Rovio's royalty rate is not public information, but average royalties in the licensing industry are about 6% of retail prices. Content Licensing accounted for 72% of the Brand Licensing segments' revenue in 2018. Currently the revenue is generated mostly through the AB movie, but as Rovio proceeds with its strategy and launches AB-themed TV animations and other content, we expect that the revenue streams will diversify.

GAMES SEGMENT'S REVENUE SPLIT 2018 BRAND LICENSING SEGMENT'S REVENUE SPLIT 2018 Advertising 11% Consumer Products 28%

Content Licensing 72% IAP 89%

Source: Company data and Nordea estimates Source: Company data and Nordea estimates

Marketing material commissioned by Rovio 31 19 June 2019 Rovio

Stable revenue streams from top games Rovio has been successful in We find that Rovio has a solid record in developing its live game portfolio in line with creating games with very long its Games as a Service (GaaS) approach. The company has succeeded in creating lifetimes games with very long lifetimes. For example, Angry Birds (AB) Friends was launched in February 2012, and it is still ranked among Rovio's top-five grossing games seven years later. AB Friends accrued EUR 31m worth of gross sales in 2018, with cumulative sales of EUR 127m since its launch. AB 2, which was launched in July 2015, has also enjoyed impressive sales growth. However, according to management, AB 2 did not have sufficient monetisation right after launch,but with new features and improvements, monetisation has improved significantly, thereby enabling the company to increase user acquisition and grow the game. AB 2 has been Rovio's top grossing game since Q1 2016, delivering record-breaking gross sales of EUR 117m in 2018 and cumulative gross sales of EUR 285m since its launch. Gross bookings for AB 2 have increased by a whopping 433% since Q1 2016, reaching EUR 32m in Q1 2019.

GROSS BOOKINGS PER GAME, EURm

67 67 70 65 65 66 63 63 60 60 56 15 14 10 15 16 16 14 47 10 15 3 7 50 7 5 4 3 7 3 40 6 7 4 7 7 7 40 36 13 10 9 6 8 29 12 11 8 8 7 11 86 30 12 8 9 12 8 8 9 8 7 8 20 7 10 35 8 30 31 32 5 8 10 20 21 20 22 6 16 18 12 6 9 0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

Angry Birds 2 Angry Birds Friends Angry Birds Blast Angry Birds Evolution

Angry Birds Match Angry Birds Pop! Angry Birds Dream Blast Other

Source: Company data and Nordea estimates One game launched, one more to go during 2019 In Q4 2018, AB 2 accounted for During Q1 2019, Rovio published a new game, AB Dream Blast, a casual puzzle game 52% of total gross bookings, targeted at an adult female audience. The game reached gross bookings of EUR 6.9m making Rovio very dependent during its ﬁrst quarter. By the end of Q1, the game performed such that the quarterly on its biggest game run-rate revenue of the game should reach EUR 11.5m if it can continue its positive performance during Q2. The successful launch of AB Dream Blast is a good refreshment of the game portfolio after 2018, during which Rovio did not launch any new games.

Rovio has announced that it will publish another game during 2019. We expect the next launch to be AB Pop 2 because it is the only game of Rovio's in soft launch. The game is a sequel to AB Pop, which was launched in 2015 and has cumulative gross sales of EUR 79m as of Q1 2019. According to the company, the game with an expected launch in 2019 might not be AB Pop 2 but some other game in development. However, we view this as fairly unlikely because the soft launch phase of new games usually takes multiple months.

Rovio's games are played globally North America is the largest geographical market for Rovio. Revenue generated in North America was EUR 177.8m in 2018, accounting for 63% of total revenue, while EMEA is the second-largest geographical area with sales of EUR 69.1m (25%). Rovio has been able to penetrate the Asian market too, but APAC accounted for only 11% of the total group revenue in 2018. Rovio currently has one game ready to be launched in the Chinese market, and the game is waiting to be published by Rovio's Chinese publishing partner.

Marketing material commissioned by Rovio 32 19 June 2019 Rovio

REVENUE BY REGION IN 2018, % REVENUE BY SEGMENT AND REGION IN 2018, EURm

300 APAC 11% 250

200

EMEA 150 25% 100 North America 50 Latin 63% America 0 1% Games Brand Licensing North America Latin America EMEA APAC

Source: Company data and Nordea estimates Source: Company data and Nordea estimates Brief history of Rovio Rovio was founded in 2003 when Niklas Hed, Jarno Väkeväinen and Kim Dikert established a mobile game development studio called Relude. In 2005 Relude received its ﬁrst round of ﬁnancing and changed its name to Rovio Mobile.

Angry Birds Classic was the During 2003-09, Rovio produced 51 mobile games. The 52nd game, the original Angry 52nd game by Rovio Birds released in December 2009, hit the jackpot and gained vast popularity around the world. After the release of Angry Birds (AB), Rovio launched a few more AB-themed games, which together reached one billion downloads in May 2012.

In 2011-14 Rovio aimed to build an entertainment powerhouse. It collaborated with brands such as Star Wars and NASA when launching AB Space and AB Star Wars in 2012. In 2013, Rovio signed distribution and production agreements with Colombia Pictures and Sony Pictures for The Angry Birds Movie, which was launched in 2016.

In 2014-16, Rovio restructured its business to focus on the core areas of games, animation and licensing. As a result of restructuring, Rovio reduced its headcount from 908 in August 2014 to 474 in December 2016. During 2017 Rovio further emphasised its focus on the games business and accordingly restructured its animation business. As a result of the restructuring, the current Brand Licensing business unit was formed and Rovio's headcount declined further to 391 in 2017. Rovio also transformed the monetisation model of its games segment from pay-to-download, which was the industry standard in 2009 when the original AB was published, to free-to-play. The transformation to a free-to-play monetisation model depicts Rovio's ability to react to changes in the fast-moving mobile gaming market.

HISTORICAL DEVELOPMENT OF ROVIO

350 “Games Building an entertainment powerhouse Restructuring and movie “Games-first” only” Transition from pay-to-download to free-to-play

300 Release of Angry Birds Movie in May 2016 50 31 250 Launch of Angry Birds 2 in July 2015

200 Launch of Angry Birds Classic in December 33 2009 150 78 48 29 248 250 69 100 159 25 111 113 50 95 83 5 51 5 0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Games revenue (EURm) Brand Licensing revenue (EURm) 28 114 377 684 848 668 476 391 418 Average headcount

Source: Company data Note: Rovio changed its accounting policy and accounting standards during 2010-18; thus, the data is not perfectly comparable.

Marketing material commissioned by Rovio 33 19 June 2019 Rovio

Strategy Rovio has identiﬁed four strategic focus areas. The chart below presents the focus areas of strategic interest and actions the company aims to take to reach its goals. An interesting observation is that Rovio states in its strategy that it actively aims to diversify its games portfolio from the causal genre into the mid-core genre. The PlayRaven acquisition completed in November 2018 is a concrete step in the right direction, as PlayRaven specialises in strategic mid-core games. Rovio aims to get the ﬁrst mid-core game developed by the PlayRaven team to soft launch during 2019.

Strengthening the baseline brand appeal by delivering an engaging entertainment offering is at the core of brand licensing. The marketing around Angry Birds Movie 2 and the 10th year anniversary events of the AB brand are deﬁnitely positive developments to expand the AB brand and licensing business.

Rovio's management acknowledges that the mobile gaming industry can be revolutionised by new technological advances. Thus, the final strategic pillar of Rovio is to explore the future of gaming. Concrete steps have been taken in the right direction as the company launched its first augmented reality (AR) game called The Isle of Pigs in 2019. In addition, Rovio has been investing significant resources in its 80%-owned subsidiary Hatch Entertainment Oy, which provides an advanced game streaming service.

Rovio's guidance for 2019 is to reach sales of EUR 300-330m with an EBIT margin between 9% and 11%. Excluding Hatch Entertainment, management guides for an EBIT margin of 12-14%. It should be noted that Rovio's long-term ﬁnancial goals from 2016-17 target growth above western mobile gaming market growth (high single-digit growth) and a 30% EBIT margin. The company has made little progress towards its long-term ﬁnancial goals and there has been no communication about the long-term targets over the past year.

ROVIO'S FOUR PILLAR STRATEGY

Grow the Angry Leverage strong Grow Games Birds brand and Explore the consolidation business Licensing future of gaming platform business

• Prioritise top live • Angry Birds • Screen and • Investigate and games in UA Movie 2 in the evaluate invest in new and resourcing second half of potential M&A technologies and 2019 targets platforms • Increase investments in • 10th year • Focus on free- • Explore external new games anniversary of to-play mobile funding and development Angry Birds games strategic partners for • Aim to launch at Hatch least 2 games in 2019

Source: Company data

Marketing material commissioned by Rovio 34 19 June 2019 Rovio

Management team Rovio has an experienced management team consisting of Kati Levoranta (CEO), René Lindell (CFO), Ville Heijari (CMO), Simo Hämäläinen (Head of Brand Licensing), Heini Kaihu (Head of HR), Alexandre Pelletier-Normand (Head of Games), Minna Raitanen (General Counsel) and Mikko Setälä as Head of Investor Relations.

Rovio’s management team has experience from all relevant sectors for the company, including games, mobile technology, intellectual property rights, governance and brand management. In addition, except for the Head of Games, who started working at Rovio during 2019, all of the management team members have long tenures at the company.

ROVIO'S MANAGEMENT TEAM

Kati Levoranta Alexandre Pelletier-Normand Simo Hämäläinen René Lindell Position (since) Position (since) Position (since) Position (since) CEO (2016) Head of Games (2019) Head of Brand Licensing (2017) CFO (2017) Education Education Education Education MSc in Law, MSc in Economics, BSc in Computes Science MSc in Engineering MBA in Economics PhD in Technology Joined Rovio in Joined Rovio in Joined Rovio in Joined Rovio in 2012 2019 2013 2014 Selected experience Selected experience Selected experience Selected experience Several leadership positions at Various international sales, marketing Strategy director at Nokia Oyj Several positions in Nokia Oyj and Gameloft SE 2003–2012 and and brand management positions at 2011–2014, Nokia Siemens Networks Oy 2014–2018, latest executive vice Oy Hartwall Ab and Heineken N.V. management consultant at the Boston 2005–2011 president, Games 2007–2013 Consulting Group 2006–2011 Share holdings Share holdings Share holdings Share holdings 9,842 0 3,690 8,444

Minna Raitanen Ville Heijari Heini Kaihu Position (since) Position (since) Position (since) General Counsel (2016) CMO (2018) Head of HR (2019) Education Education Education MA in English Translation, MSc in Law Undergraduate student of Philosophy Communication and Digital Media Joined Rovio in Joined Rovio in Joined Rovio in 2012 2010 2012 Selected experience Selected experience Selected experience General manager at Two Men and a Senior legal counsel at Nokia Siemens Dog Oy 2015–2016, EVP product member of leadership Networks Oy and Nokia Oyj head of supply, Europe at Vungle team at Sulake 2011–2012 2005–2012 2014–2015 Share holdings Share holdings Share holdings 13,750 37,460 43,690

Source: Company data

Marketing material commissioned by Rovio 35 19 June 2019 Rovio

Board of directors have skin in the game Rovio has an experienced board of directors led by chairman Mika Ihamuotila, who is also a shareholder in Rovio with 0.31% of the shares. In addition, vice chairman of the board Kaj Hed and member of the board Camilia Hed-Wilson own 40% and 20% of the shares in Oivor AB respectively, which in turn has a >40% holding in Rovio, thus making Kaj Hed and Camilia Hed-Wilson the company's largest shareholders.

ROVIO'S BOARDS OF DIRECTORS

Mika Ihamuotila Kaj Hed Camila Hed-Wilson Jenny Wolfram Position (since) Position (since) Position (since) Position (since) Chairman of the Board (2017) Vice chairman of the board (2017) Board member (2011) Board member (2017) Education Education Education Education Electrical engineering PhD in Economics BBA in Human Resources MSc in Law Economics Selected experience Selected experience Selected experience Selected experience President of Marimekko Oyj 2008–2015 Chairman of Rovio’s Board in and CEO 2008–2016, Founder and the chairman of the CEO, a board member and founder of 2005–2006 and 2008–2017, A member of the Board of Elisa Oyj board of Fiilinki Oy, BrandBastion Ltd, The chairman of the board of Hatch 2003–2008, CEO and the chairman of the board of A member of the board of directors Entertainment Oy since 2016 President and CEO of Sampo Pankki So Ihana Oy and CEO of Jenny Wolfram Ab Oyj 2001–2007 Share holdings Share holdings* Share holdings* Share holdings 245,190 12,919,011 6,459,505 0 Independency Independency Independency Independency Independent of the Company and its Independent of the company and its major shareholders Independent investor Independent investor major shareholders

Kim Ignatius Fredrik Löving Jeferson Valadares Position (since) Position (since) Position (since) Board member (2017) Board member (2019) Board member (2019) Education Education Education MSc in E-Commerce BSc in Economics MSc in Computer Science and AI BSc in Information Technology Selected experience Selected experience Selected experience

Executive vice president of Sanoma Head of studio of Goodbye Kansas, Co-founder and CEO of Doppio, Corporation since 2017, Head of studio and general manager general manager, Mobile and VP of Chairman of Rovio’s Audit Committee of DICE / EA (Battlefield Franchise) Product Development of Bandai Namco and Remuneration Committee since 2013-2017 and producer and Entertainment America, 2014-2018 2017 development director 2007-2013

Share holdings Share holdings Share holdings 000 Independency Independency Independency Independent of the company and its Independent of the company and its Independent of the company and its major shareholders major shareholders major shareholders

Source: Company data

Marketing material commissioned by Rovio 36 19 June 2019 Rovio

Shareholders As mentioned, Oivor AB is the largest shareholder with 40.5% ownership of Rovio, followed by Swedbank AB and Invesco Ltd with 10% and 5.9%, respectively. As the top 20 shareholders own almost 80% of the company, the ownership base of Rovio can be said to be concentrated.

LARGEST SHAREHOLDERS IN ROVIO AS OF 28 MAY 2019 Number of Shares % of shares Market value (EUR) Oivor AB 32,297,528 40.5% 228,989,474 Swedbank AB 8,000,000 10.0% 56,720,000 Invesco Ltd 4,700,000 5.9% 33,323,000 Keskinainen Elakevakuutusyhtio Ilmarinen 2,067,500 2.6% 14,658,575 Capita PLC 2,035,682 2.6% 14,432,985 Hed Niklas 1,996,746 2.5% 14,156,929 Vesterbacka Peter 1,456,229 1.8% 10,324,664 Sijoitusrahasto Aktia 1,365,074 1.7% 9,678,375 Danske Bank A/S 1,310,059 1.6% 9,288,318 Keskinainen Tyoelakevakuutusyhtiö ELO 1,200,000 1.5% 8,508,000 State Pension Fund 1,000,000 1.3% 7,090,000 Nordea Bank Abp 847,162 1.1% 6,006,379 Saastopankki Fund Management/Finla 831,994 1.0% 5,898,837 Varma Mutual Pension Insurance Co 677,471 0.9% 4,803,269 Rovio Entertainment Oyj 595,237 0.7% 4,220,230 Danske Investment Finnish Equity 580,000 0.7% 4,112,200 DNB ASA 511,051 0.6% 3,623,352 Muotitla LTD 476,190 0.6% 3,376,187 Aktia Fund Management Ltd 410,000 0.5% 2,906,900 Veritas Pension Insurance Co Ltd 348,000 0.4% 2,467,320 Top 20 combined 62,705,923 78.7% 444,584,994 Other 16,971,719 21.3% 121,126,264 Total 79,677,642 100.0% 565,711,258

Source: Bloomberg

Marketing material commissioned by Rovio 37 19 June 2019 Rovio Game portfolio – fewer, bigger and better

Rovio aims to develop its games portfolio following its "fewer, bigger and better" portfolio strategy to support long-term revenue generation – games that have potential for a long lifetime, to reach top-grossing lists and to become digital hobbies are focused upon and developed further. Following its game-as-a-service (GaaS) model, Rovio focuses on its existing top-ﬁve games. The current game portfolio consists of 22 games, of which the top games are introduced in more detail below. Rovio's game pipeline is in a healthy state with 12 games in different stages of development, one game in soft launch and one awaiting for release in China.

The portfolio logic – fewer games, genre mastery and hybrid products Different genres attract Rovio's portfolio logic is built on three key principles: "fewer, bigger and better", hybrid different cohorts of players; products and genre mastery. thus, diversifying the game portfolio into new genres Rovio currently has 22 live games in its game portfolio, but the company focuses only widens the potential player on its top performing games based on its "fewer, bigger and better" portfolio strategy. base of Rovio This means that the majority of all user acquisition (UA) investments and development efforts are focused on the top-four or top-ﬁve highest grossing games.

Rovio is pursuing genre mastery in certain genres of its choice. So far, the company has been successful in genres such as slingshot and puzzle, ie casual games. Casual games have simple rules and shorter gaming sessions, and appeal to wider audiences when compared with games in the midcore genre. Midcore games are more serious and require more skills and time from both the players and developers of the game.

Currently, Rovio is actively trying to break through into the midcore genre to access new player cohorts. Rovio has already published two midcore games: 1) Angry Birds Evolution, which is a role-playing game (RPG); and, 2) Battle Bay, which is a real-time strategy game featuring player-versus-player battles. Furthermore, we expect that Rovio will have a soft launch release of a new midcore game already during 2019. According to the company, the new game belongs to the 4x strategy genre and is being developed by the team of PlayRaven, the company Rovio acquired in late 2018. So far, Rovio's midcore titles, despite being fairly successful, have not reached similar success and longevity as its casual games, such as Angry Birds 2 (AB 2) or AB Match.

However, Rovio's most successful game, AB 2, is a "hybrid" game. AB 2 combines elements of the casual slingshot (using a slingshot to ﬁre angry birds at green pigs) and RPG (collect and evolve the angry birds) genres. Games that combine elements of different genres are called hybrid products,and developing hybrids is one of the key principles of Rovio's portfolio strategy.

Angry Birds 2 AB 2, Rovio's best performing game, is a direct sequel to the original Angry Birds game that was launched in December 2009. Similar to its predecessor, AB 2 is a slingshot game that offers users modernised graphics and new engaging features.

AB 2 was launched in July 2015, and the current version of AB 2 is well rated in the US App Store (4.7 out of 5 stars as of June 2019). AB 2 has generated cumulative gross sales of EUR 285m by Q1 2019, of which EUR 32m was generated in Q1 2019. Rovio is heavily dependent on AB 2, as the game accounted for over 46% of total gross bookings of all of Rovio's games in 2018.

We gathered grossing rank data of Rovio's main titles provided by App Annie, an app market data and insights provider that produces information on downloads, revenue, ratings and other app speciﬁcs. The below table presents the progression of AB 2's grossing rank when compared with all games available in the App Store. AB 2 has been fairly stable in all its main markets, albeit with a slight downward trend from the start of March 2019. In the US, AB 2 was, on average, the 54th highest grossing game during March 2019, while the ﬁgure was 57th and 65th for April and May respectively.

Marketing material commissioned by Rovio 38 19 June 2019 Rovio

AB 2'S GROSSING RANK IN THE iPHONE APP STORE

100

120 01/03/2019 15/03/2019 29/03/2019 12/04/2019 26/04/2019 10/05/2019 24/05/2019

US UK France Germany

Source: App Annie and Nordea According to GameReﬁnery's proprietary POWERSCORE®, which is an objective, fact- based indicator to measure how well the feature set of the game or game concept corresponds with current market trends, AB 2 is a strong performer within the population of similar slingshot games. AB 2 has a POWERSCORE® of 86 (scale 0-100) as of June 2019, while the current average POWERSCORE® of competing games is ~51.

Based on GameReﬁnery's proprietary POWERSCORE® and our estimation, the distribution of daily revenue potential of AB 2 is presented below. It is noteworthy that GameReﬁnery generates its POWERSCORE® and appropriate potential revenue distribution using only US App Store data.

All in all, because of the high POWERSCORE® and solid track record of grossing rank data of AB 2, we do not foresee any drastic change in the monetisation potential of AB 2 in the near future.

AB 2 REVENUE POTENTIAL DISTRIBUTION: US APP STORE, AB 2 POWERSCORE®, US APP STORE (SCALE 0-100) USD 100 0% 10% 20% 30% 40% 90 >$200,000 7% 80 $100,000-$199,999 6% 70 $70,000-$99,999 1% $50,000-$69,999 7% 60 $30,000-$49,999 9% 50 $10,000-$29,999 34% 40 $2,000-$9,999 31% <$2,000 4% AB 2 Average of 14 competitors

Source: GameRefinery and Nordea estimates Source: GameRefinery and Nordea estimates

Marketing material commissioned by Rovio 39 19 June 2019 Rovio

Angry Birds Dream Blast AB Dream Blast is Rovio's latest game, which was released in Q1 2019. The game is a casual game in which the player needs to pop bubbles to solve puzzles. AB Dream Blast is easy to pick up and play, and the target audience is adult female gamers.

The current version of AB Dream Blast is well rated in the US App Store (4.7 out of 5 stars as of June 2019). The game generated EUR 6.9m in gross sales during its ﬁrst quarter, but the company guided that it reached a run-rate of EUR 11m per quarter. If the game is able to maintain its good performance, AB Dream Blast will be the second highest grossing game of Rovio in Q2 2019.

The table below presents the progression of AB Dream Blast's grossing rank when compared with all games available in the App Store. AB Dream Blast's performance has been fairly stable in all its main markets, with a slight upward trend in the US markets during the last three months. In the US, AB Dream Blast was, on average, the 147th highest grossing game during March 2019, while the ﬁgure was 137th and 122nd for April and May respectively. This indicates that AB Dream Blast has been able to maintain, and even improve, its performance since the end of Q1.

AB DREAM BLAST'S GROSSING RANK IN THE iPHONE APP STORE

100

150

200

250

US UK France Germany

Source: App Annie and Nordea According to GameReﬁnery's proprietary POWERSCORE®, AB Dream Blast has room to improve within the genre of similar puzzle games. AB Dream Blast has a POWERSCORE® of 79 as of June 2019, while the current average POWERSCORE® of competing games is ~85. It should be noted that AB Dream Blast is a young game and Rovio is slowly optimising its features, which is also visible in the upward trending POWERSCORE®. In addition, the puzzle genre is extremely competitive, making the comparison group very tough.

Based on GameReﬁnery's proprietary POWERSCORE® and our estimation, the distribution of daily revenue potential of AB Dream Blast is presented below. We see potential for the game, as Rovio keeps on adding new features and updating the game.

All in all, because of the improving POWERSCORE® and grossing rank data of AB Dream Blast, we see increasing monetisation potential of AB Dream Blast in the near future.

Marketing material commissioned by Rovio 40 19 June 2019 Rovio

AB DREAM BLAST REVENUE POTENTIAL DISTRIBUTION: US AB DREAM BLAST POWERSCORE®, US APP STORE APP STORE, USD (SCALE 0-100) 0% 10% 20% 30% 40% 50% 90 >$200,000 1% $100,000-$199,999 2% 85 $70,000-$99,999 2% $50,000-$69,999 3% 80 $30,000-$49,999 8% 75 $10,000-$29,999 27% $2,000-$9,999 45% 70 <$2,000 12% 65 Q3 18 Q4 18 Q1 19 Current Source: GameRefinery and Nordea estimates AB Dream Blast Average of 20 competitors

Source: GameRefinery and Nordea estimates Angry Birds Friends AB Friends is a slingshot game whereby players compete with their friends and users around the world in AB tournaments every week. As such, AB Friends is a traditional slingshot game and with its multiplayer features, it is considered to be a hybrid game.

AB Friends was launched in February 2012, making it the oldest top-grossing game of Rovio. As of the end of Q1 2019, the game had cumulative gross sales of EUR 127m. Regardless of its longevity, AB Friends has continued to generate solid revenue, and the game accounted for over 12% of Rovio's total games revenue in 2018. The current version of AB Friends is rated 4.6 out of 5 stars in the US App Store, as of June 2019.

The table below presents the progression of AB Friends' grossing rank when compared with all games available in the App Store. AB Friends' performance has been quite volatile with a slight downward trend in Germany during the past three months. However, the game has been live for over seven years and it has been performing well all this time; therefore, we do not see any material reason for the game to lose popularity in the near future.

AB FRIENDS' GROSSING RANK IN THE iPHONE APP STORE

0 50 100 150 200 250 300 350 400 450

US UK Germany

Source: App Annie and Nordea

Marketing material commissioned by Rovio 41 19 June 2019 Rovio

Angry Birds Match AB Match is a casual puzzle game, where the player needs to match items to rescue hatchlings. Similar to AB Dream Blast, the game competes in the saturated puzzle game segment, where already established games such as Candy Crush Saga are dominating the market.

AB Match was launched in August 2017 and it has generated cumulative gross sales of EUR 44m as of the end of Q1 2019. AB Match was the third-largest game of Rovio during 2018, but in Q1 2019, it dropped to the fourth place, replaced by AB Dream Blast. The current version of the game is rated 4.6 out of 5 stars in the US App Store, as of June 2019.

The table below presents the progression of AB Match's grossing rank when compared with all games available in the App Store. AB Match's performance has been stable with a slight upward trend during the past three months, especially in the US. In the US, AB Match was, on average, the 199th highest grossing game during March 2019, while the ﬁgure was 179th and 175th for April and May respectively. This indicates that AB Dream Match has been able to keep up its stable performance.

AB MATCH'S GROSSING RANK IN iPHONE APP STORE

100

150

200

250

300

350

US UK Germany

Source: App Annie and Nordea According to GameReﬁnery's proprietary POWERSCORE®, AB Match's features are in line with competing games of the same genre. AB Match has a POWERSCORE® of 85 as of June 2019, in line with the current average POWERSCORE® of competing games.

Based on GameReﬁnery's proprietary POWERSCORE® and our estimation, the distribution of daily revenue potential of AB Match is presented below. Altogether, we see that AB Match is set to keep its stable performance as indicated by its high POWERSCORE® and slightly upward trending grossing rank.

AB MATCH REVENUE POTENTIAL DISTRIBUTION: US APP AB MATCH POWERSCORE®: US APP STORE (SCALE 0-100) STORE, USD 90 0% 5% 10% 15% 20% 25% 30% 35%

>$200,000 7% 85 $100,000-$199,999 7% 80 $70,000-$99,999 3% $50,000-$69,999 7% 75 $30,000-$49,999 9% 70 $10,000-$29,999 32% $2,000-$9,999 32% 65 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 <$2,000 5% AB Match Average of 20 competitors

Source: GameRefinery and Nordea estimates Source: GameRefinery and Nordea estimates

Marketing material commissioned by Rovio 42 19 June 2019 Rovio

The next release is Angry Birds POP 2 Currently, AB POP 2 is in soft launch, which we expect to be released during H2 2019. The game is a sequel to AB POP, which was launched in March 2015 and has generated EUR 79m in cumulative gross sales as of Q1 2019. The performance of AB POP showed a downward trend during 2018, as the gross sales of the game declined from EUR 5.5m in Q1 2018 to EUR 3.3m in Q1 2019.

AB POP 2 belongs to the puzzle genre, similar to AB Match and AB Dream Blast. As the game is currently in soft launch, there is no relevant grossing data available.

Marketing material commissioned by Rovio 43 19 June 2019 Rovio Business model

Rovio is a global games-ﬁrst entertainment company, which creates, develops and publishes mobile games and acts as a brand licensor in various entertainment and consumer product categories. The company is best known for its global Angry Birds brand, which started out as a popular mobile game in 2009, and has since evolved to include various entertainment and consumer products in brand licensing.

Free-to-play mobile games for the mass market With over four billion downloads of its mobile games, Rovio has clearly reached a global mobile gaming audience. The company's global conquest started in December 2009 when it released the original Angry Birds mobile game and simultaneously invented the 'slingshot' genre in mobile gaming. Since then, the company has expanded its product portfolio to the puzzle, RPG and PvP (player versus player) genres, and adopted the free-to-play monetisation model in its games.

Creating 'fewer, bigger and Today, the free-to-play model has evolved into a games-as-a-service (GaaS) model better' free-to-play (F2P) where developers drive player retention by developing and updating existing games mobile games rather than launching new ones. The global trend towards the GaaS model is driven by the current market environment in which challenges in discoverability and rising user acquisition costs have forced developers to think carefully about how to allocate their marketing budgets. Though there is no silver bullet in sight, the company's 'fewer, bigger and better' strategy (ie turning top-grossing games into long-term digital hobbies) makes sense, in our view. The business model is presented in further detail below.

BUSINESS MODEL – GAMES SEGMENT

GAMES

Rovio runs paid and organic user acquisition campaigns in digital media channels

In the F2P model, the majority of revenue is generated through in-app purchases Players download games from application stores for free (IAP)

Players do in-application Players watch ads in the purchases game

89% of games revenues 11% of games revenues

Source: Company data (Annual Report 2018)

Marketing material commissioned by Rovio 44 19 June 2019 Rovio

The company operates mainly The Games business unit employs approximately 300 professionals divided between in the match-3 puzzle and the Battle and Puzzle studios in Espoo, Finland, and the RPG studio in Stockholm, slingshot genres; the PlayRaven Sweden. In December 2018, Rovio expanded its development capabilities with the acquisition will expand the acquisition of Helsinki-based Finnish company PlayRaven, which previously focused on focus to strategy mobile strategy games. The acquisition is intended to speed up Rovio's expansion into the lucrative strategy game genre.

Regarding the game development process, the typical time span between the initial idea and global launch is 10-24 months. Team size and consequently development costs increase as a project proceeds from the concept phase to production and launch. The general game development framework is presented below.

GAME DEVELOPMENT PROCESS

Production Soft launch Global launch

Ideas & Prototyping & Preproduction Investment # of projects concepts demos

Potential ideas Game ideas are Based on the soft with strategic fit Games are produced by Production, launch KPIs, proceed. The Games are built launched in individuals or planning, games are business case with an agile selected markets, teams, collected budgeting and launched globally. and the game mindset. acquiring targeted and pitched on a resourcing. UA is ramped up design are players. weekly basis. gradually. evaluated

Team size: Team size: Team size: Team size: 1–3 3-6 10–25 10-25 Team size: 10–35 Length: Length: Length: Length: 3–4 months 2-6 months 2-6 months 3-8 months

Timeline

Source: Company data Brand Licensing spreads the Angry Birds gospel In 2014-16, Rovio restructured its business and switched its focus to games, licensing and animation. In addition, during the ﬁrst half of 2017, the company further emphasised its focus on the games business. As a result, the current Brand Licensing business unit was established. Previously, the company used its own balance sheet to ﬁnance animation and movie initiatives.

Brand Licensing consists of two The Brand Licensing business is divided into two sub-units: Consumer Products and sub-units: Consumer Products Content Licensing. The Consumer Products unit is responsible for licensing the Angry and Content Licensing Birds brand for producers of physical goods, such as toys, food and location-based entertainment like activity and entertainment parks. Furthermore, Content Licensing licenses the Angry Birds brand for producers of digital content other than games. The upcoming Angry Birds 2 movie is a prime example of content licensing.

Marketing material commissioned by Rovio 45 19 June 2019 Rovio

BUSINESS MODEL – BRAND LICENSING

BRAND LICENSING

Rovio licenses Angry Birds brand to product manufacturers and content creators directly or through agents

Compared to in-house Manufacturers make the products and handle distribution. Content production, licensing minimises creators create content and handle distribution capex needs and improves proﬁtability

Royalties from content Royalties from product licensing licensing

72% of licensing 28% of licensing revenues revenues

Source: Company data (Annual Report 2018)

According to Rovio, royalties in As shown in the image above, content licensing accounts for the majority of the Brand the licensing industry are 6% of Licensing business unit's revenue. The revenue stems mainly from royalties, which, retail prices, on average according to Rovio, are on average about 6% of retail prices. However, the company has emphasised that royalty levels are negotiated on a deal-by-deal basis and that different product and content categories entail different compensation for Rovio. Even though revenue in the Brand Licensing unit is clearly below that of the Games unit, the contribution to the group's adjusted EBITDA is notable, as shown below.

EBITDA AND MARGIN, EURm AND %

50 80%

45 70% 40 60% 35 The licensing business delivers 30 50% lucrative margins with 25 40% negligible capex 20 30% 15 20% 10 5 10% 0 0% 2016 2017 2018 Adj. EBITDA (BL) Adj. EBITDA (Games) Margin (BL) Margin (Games)

Source: Company data and Nordea estimates

Marketing material commissioned by Rovio 46 19 June 2019 Rovio

The games and licensing Moreover, Brand Licensing plays a pivotal role in supporting the growth of the Games businesses have a symbiotic unit globally and vice versa. The company emphasises the importance of a credible relationship roadmap for Angry Birds content and games, which builds attention and demand among consumers, retailers and licensees. The current roadmap is being led by the upcoming Angry Birds 2 movie, which is set to be released in August 2019.

Hatch streaming service reflects the future of gaming Hatch is trying to do what Hatch, Rovio's 80%-owned subsidiary, develops a cloud-based game streaming service Netflix did for movies and for Android mobile devices and TVs. Neogames, the Finnish game industry series organisation, sees console and mobile cloud services as a trend in the future, since they enable game developers to bypass the dominant application stores such as Apple App Store and Google Play. From players' point of view, the added value from this 'Netflix' model comes from the ease of playing games without having to download them.

At the end of the 2018, Hatch offered more than 100 live titles. Currently, signed developers and publishers have committed to bringing up the number of live games to over 350. Although Hatch also works in current 4G networks, Neogames does not believe that cloud-based gaming platforms, such as Hatch, will be able to challenge the incumbent platforms until 5G becomes mainstream.

So far, Hatch has created zero revenue for Rovio and the company is currently looking for external funding to boost the growth prospects of the service. Moreover, the company is ready to reduce its stake in Hatch to below 50%. In 2018, Hatch's operating expenses amounted to approximately to EUR 7.3m.

BUSINESS MODEL – HATCH STREAMING SERVICE Games Games Game developers Premium and publishers subscription Revenue Monthly subscription fee Hatch platform Games Ads Free Advertisers subscription Ads

Source: Nordea

Marketing material commissioned by Rovio 47 19 June 2019 Rovio Risk factors

Below, we list the main risk factors that we ﬁnd relevant for Rovio. The purpose of this is not to provide a comprehensive list of all of the risks that the company may face, but instead to highlight those that we ﬁnd most relevant. In our view, the relevant short-term risks mainly come from external sources.

Decline of the appeal of the Angry Birds brand Though Rovio has launched non-Angry Birds games, the company's revenue effectively comes from Angry Birds-related games and licensing. Thus, a decline of the appeal of the brand would have notable consequences, especially for the licensing business.

Ability to attract and retain top talent Given the global and highly competitive nature of the mobile gaming market, Rovio's success depends heavily on attracting and retaining top international specialists and executives.

Ability to develop games with lucrative feature sets According to a study by GameReﬁnery, 50% of a game's success is explained by its feature set. Mobile gaming is still a nascent industry, which means that 'a winning feature set' is a constantly moving target, making success extremely hard to replicate in subsequent games.

Failure to create new IPs and enter new genres Rovio's current game portfolio is dependent on AB themed casual games, such as slingshot, match 3 and bubble popping games. In the future Rovio aims to enter the mid-core genre with new games without the AB brand. This may turn out to be a costly task, eroding Rovio's proﬁtability and cash position.

Regulation The mobile gaming industry is facing increasing regulation, especially in China. The trend towards tighter regulation of mobile game monetisation could hamper the ﬁnancial performance of Rovio in the long run.

Rising user acquisition costs According to Neogames, a Finnish game industry organisation, challenges in discoverability and rising user acquisition costs have been a challenge in the games industry for years. This risk applies especially to smaller companies with limited marketing resources.

Marketing material commissioned by Rovio 48 19 June 2019 Rovio Reported numbers and forecasts

INCOME STATEMENT EURm 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E Net revenue n.a. n.a. n.a. 158 142 192 297 281 315 333 347 Revenue growth n.a. n.a. n.a. n.a. -10.3% 34.9% 55.0% -5.4% 12.0% 5.6% 4.2% of which organic n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. of which FX n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. EBITDA 0 0 0 17 -6 35 60 48 50 50 51 Depreciation and impairments PPE 0 0 0 0 0 0 0 0 0 0 0 of which leased assets 0 0 0 0 0 0 0 0 0 0 0 EBITA 0 0 0 17 -6 35 60 48 50 50 51 Amortisation and impairments 0 0 0 -7 -15 -18 -29 -16 -13 -10 -7 EBIT n.a. n.a. n.a. 10 -22 17 31 32 37 40 44 of which associates 0 0 0 0 0 0 0 0 0 0 0 Associates excluded from EBIT 0 0 0 0 0 0 0 0 0 0 0 Net financials 0 0 0 1 1 -1 -5 1 0 0 0 of which lease interest 0 0 0 0 0 0 0 0 0 0 0 Changes in value, net 0 0 0 0 0 0 0 0 0 0 0 Pre-tax profit 0 0 0 11 -21 16 27 32 37 40 44 Reported taxes 0 0 0 -3 3 -5 -6 -8 -7 -8 -9 Net profit from continued operations 0 0 0 8 -18 11 21 25 30 32 36 Discontinued operations 0 0 0 0 0 0 0 0 0 0 0 Minority interests 0 0 0 0 0 0 0 0 0 0 0 Net profit to equity 0 0 0 8 -18 11 21 25 30 32 36 EPS n.a. n.a. n.a. 0.11 -0.24 0.14 0.27 0.31 0.37 0.40 0.44 DPS 0.00 0.00 0.00 0.04 0.00 0.06 0.06 0.09 0.11 0.12 0.13 of which ordinary 0.00 0.00 0.00 0.04 0.00 0.06 0.06 0.09 0.11 0.12 0.13 of which extraordinary 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Profit margin in percent EBITDA n.a. n.a. n.a. 10.8% -4.5% 18.5% 20.2% 17.0% 15.9% 15.1% 14.8% EBITA n.a. n.a. n.a. 10.8% -4.5% 18.5% 20.2% 17.0% 15.9% 15.1% 14.8% EBIT n.a. n.a. n.a. 6.3% -15.2% 8.8% 10.6% 11.2% 11.8% 12.1% 12.7%

Adjusted earnings EBITDA (adj) 0 0 0 17 -6 35 65 48 50 50 51 EBITA (adj) 0 0 0 17 -6 35 65 48 50 50 51 EBIT (adj) 0 0 0 10 -22 17 36 31 37 40 44 EPS (adj) n.a. n.a. n.a. 0.11 -0.24 0.14 0.33 0.30 0.37 0.40 0.44

Adjusted profit margins in percent EBITDA (adj) n.a. n.a. n.a. 10.8% -4.5% 18.5% 21.7% 16.9% 15.9% 15.1% 14.8% EBITA (adj) n.a. n.a. n.a. 10.8% -4.5% 18.5% 21.7% 16.9% 15.9% 15.1% 14.8% EBIT (adj) n.a. n.a. n.a. 6.3% -15.2% 8.8% 12.1% 11.1% 11.8% 12.1% 12.7%

Performance metrics CAGR last 5 years Net revenue n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 14.8% 18.5% 12.6% EBITDA n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. 24.1% n.m. 7.7% EBIT n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 30.1% n.m. 21.2% EPS n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28.2% n.m. 25.6% DPS n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. 22.8% n.m. 16.8% Average last 5 years Average EBIT margin n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6.4% 7.8% 11.1% 11.7% Average EBITDA margin n.a. n.a. n.a. n.a. n.a. n.a. n.a. 14.4% 15.2% 17.2% 16.5% VALUATION RATIOS - ADJUSTED EARNINGS EURm 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E P/E (adj) n.a. n.a. n.a. n.a. n.a. n.a. 27.6 12.7 19.6 18.1 16.5 EV/EBITDA (adj) n.a. n.a. n.a. n.a. n.a. n.a. 9.9 3.8 8.4 7.8 7.1 EV/EBITA (adj) n.a. n.a. n.a. n.a. n.a. n.a. 9.9 3.8 8.4 7.8 7.1 EV/EBIT (adj) n.a. n.a. n.a. n.a. n.a. n.a. 17.8 5.9 11.4 9.7 8.2 VALUATION RATIOS - REPORTED EARNINGS EURm 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E P/E n.a. n.a. n.a. n.a. n.a. n.a. 33.6 12.5 19.6 18.1 16.5 EV/Sales n.a. n.a. n.a. n.a. n.a. n.a. 2.15 0.65 1.34 1.18 1.05 EV/EBITDA n.a. n.a. n.a. n.a. n.a. n.a. 10.7 3.8 8.4 7.8 7.1 EV/EBITA n.a. n.a. n.a. n.a. n.a. n.a. 10.7 3.8 8.4 7.8 7.1 EV/EBIT n.a. n.a. n.a. n.a. n.a. n.a. 20.4 5.8 11.4 9.7 8.2 Dividend yield (ord.) n.a. n.a. n.a. n.a. n.a. n.a. 0.7% 2.4% 1.5% 1.7% 1.8% FCF yield n.a. n.a. n.a. n.a. n.a. n.a. 7.1% 13.6% 7.8% 6.7% 6.7% FCF Yield bef A&D, lease adj n.a. n.a. n.a. n.a. n.a. n.a. 8.2% 14.0% 7.8% 6.7% 6.7% Payout ratio n.a. n.a. n.a. 37.1% 0.0% 42.3% 22.3% 29.4% 29.9% 30.3% 29.4% Source: Company data and Nordea estimates

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BALANCE SHEET EURm 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E Intangible assets 0 0 0 39 69 74 53 39 29 23 20 of which R&D 0 0 0 0 0 0 0 0 0 0 0 of which other intangibles 0 0 0 39 69 74 53 39 29 23 20 of which goodwill 0 0 0 0 0 0 0 0 0 0 0 Tangible assets 0 0 0 2 1 1 1 1 1 1 1 of which leased assets 0 0 0 0 0 0 0 0 0 0 0 Shares associates 0 0 0 0 0 0 0 0 0 0 0 Interest bearing assets 0 0 0 0 0 0 0 0 0 0 0 Deferred tax assets 0 0 0 0 6 1 3 5 0 0 0 Other non-IB non-current assets 0 0 0 1 2 1 1 1 1 1 1 Other non-current assets 0 0 0 0 0 0 0 0 0 0 0 Total non-current assets 0 0 0 42 77 77 57 45 31 25 21 Inventory 0 0 0 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 25 19 28 29 23 26 27 28 Short-term leased assets 0 0 0 0 0 0 0 0 0 0 0 Other current assets 0 0 0 17 13 16 13 11 13 13 14 Cash and bank 0 0 0 54 34 29 91 124 162 192 221 Total current assets 0 0 0 95 66 73 133 158 200 232 263 Assets held for sale 0 0 0 0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Total assets 0 0 0 138 143 150 190 203 231 257 285

Shareholders equity 0 0 0 94 74 87 140 160 182 206 232 Of which preferred stocks 0 0 0 0 0 0 0 0 0 0 0 Of which equity part of hybrid debt 0 0 0 0 0 0 0 0 0 0 0 Minority interest 0 0 0 0 0 0 0 0 0 0 0 Total Equity 0 0 0 94 74 87 140 160 182 206 232 Deferred tax 0 0 0 0 0 0 0 0 0 0 0 Long term interest bearing debt 0 0 0 0 16 3 3 3 4 4 4 Pension provisions 0 0 0 0 0 0 0 0 0 0 0 Other long-term provisions 0 0 0 0 0 0 0 0 0 0 0 Other long-term liabilities 0 0 0 0 0 0 0 0 0 0 0 Non-current lease debt 0 0 0 0 0 0 0 0 0 0 0 Convertible debt 0 0 0 0 0 0 0 0 0 0 0 Shareholder debt 0 0 0 0 0 0 0 0 0 0 0 Hybrid debt 0 0 0 0 0 0 0 0 0 0 0 Total non-current liabilities 0 0 0 0 17 3 3 4 4 4 4 Short-term provisions 0 0 0 1 3 1 1 1 1 1 1 Accounts payable 0 0 0 6 8 8 9 11 12 13 13 Current lease debt 0 0 0 0 0 0 0 0 0 0 0 Other current liabilities 0 0 0 37 33 35 37 29 32 34 35 Short term interest bearing debt 0 0 0 0 8 17 0 0 0 0 0 Total current liabilities 0 0 0 44 53 60 47 40 45 47 49 Liabilities for assets held for sale 0 0 0 0 0 0 0 0 0 0 0 Total liabilities and equity 0 0 0 138 143 150 190 203 231 257 285

Balance sheet and debt metrics Net debt 0 0 0 -54 -10 -10 -88 -120 -158 -188 -218 of which lease debt 0 0 0 0 0 0 0 0 0 0 0 Working capital 0 0 0 -1 -10 1 -4 -5 -6 -6 -6 Invested capital 0 0 0 41 68 78 53 40 25 18 15 Capital employed 0 0 0 94 91 89 143 163 186 210 235 ROE n.m. n.m. n.m. 17.3% -21.5% 13.3% 18.3% 16.3% 17.5% 16.7% 16.2% ROIC n.m. n.m. n.m. 38.7% -31.6% 18.5% 43.9% 53.6% 91.5% n.m. n.m. ROCE n.a. n.a. n.a. 10.7% -23.7% 18.9% 21.9% 19.3% 20.0% 19.2% 18.7%

Net debt/EBITDA n.m. n.m. n.m. -3.1 1.5 -0.3 -1.5 -2.5 -3.2 -3.8 -4.2 Interest coverage n.a. n.a. n.a. n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. Equity ratio n.m. n.m. n.m. 68.0% 51.8% 58.0% 73.8% 78.5% 79.0% 80.2% 81.4% Net gearing n.m. n.m. n.m. -57.4% -13.3% -11.4% -62.9% -75.3% -86.8% -91.4% -93.9% Source: Company data and Nordea estimates

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CASH FLOW STATEMENT EURm 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E EBITDA (adj) for associates 0 0 0 17 -6 35 60 48 50 50 51 Paid taxes 0 0 0 -9 1 0 -1 -11 -7 -8 -9 Net financials 0 0 0 0 -1 -2 -1 0 0 0 0 Change in provisions 0 0 0 1 2 -2 0 0 0 0 0 Change in other LT non-IB 0 0 0 -2 -6 5 -1 -2 5 0 0 Cash flow to/from associates 0 0 0 0 0 0 0 0 0 0 0 Dividends paid to minorities 0 0 0 0 0 0 0 0 0 0 0 Other adj to reconcile to cash flow 0 0 0 0 5 -1 4 4 0 0 0 Funds from operations (FFO) 0 0 0 7 -5 35 60 39 48 42 43 Change in NWC 0 0 0 10 6 -13 -1 3 1 0 0 Cash flow from operations (CFO) 0 0 0 17 1 23 60 43 48 43 43 Capital expenditure 0 0 0 0 0 0 0 0 -3 -4 -4 Free cash flow before A&D 0 0 0 17 1 23 60 43 45 39 39 Proceeds from sale of assets 0 0 0 0 0 0 0 0 0 0 0 Acquisitions 0 0 0 -38 -44 -23 -9 -1 0 0 0 Free cash flow 0 0 0 -21 -42 0 51 41 45 39 39 Free cash flow bef A&D, lease adj 0 0 0 17 1 23 60 43 45 39 39

Dividends paid 0 0 0 -3 0 -5 -5 -7 -7 -9 -10 Equity issues / buybacks 0 0 0 0 0 0 36 1 0 0 0 Net change in debt 0 0 0 0 25 -6 -17 0 0 0 0 Other financing adjustments 0 0 0 0 0 0 -1 -3 0 0 0 Other non-cash adjustments 0 0 0 78 -2 5 -3 1 0 0 0 Change in cash 0 0 0 54 -19 -6 62 33 38 30 29

Cash flow metrics Capex/D&A n.m. n.m. n.m. 0.0% 0.0% 0.0% 0.0% 0.0% 25.4% 38.5% 55.8% Capex/Sales n.a. n.a. n.a. 0.0% 0.0% 0.0% 0.0% 0.0% 1.0% 1.1% 1.2%

Key information Share price year end (/current) n.a. n.a. n.a. n.a. n.a. n.a. 9 4 7 7 7 Market cap. n.a. n.a. n.a. n.a. n.a. n.a. 728 303 580 580 580 Enterprise value n.a. n.a. n.a. n.a. n.a. n.a. 640 183 422 392 363 Diluted no. of shares, year-end (m) 0.0 0.0 0.0 74.9 74.9 75.9 80.6 79.4 79.4 79.4 79.4 Source: Company data and Nordea estimates

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Completion Date

18 Jun 2019, 18:53 CET

Nordea Bank Abp Nordea Bank Abp, filial i Sverige Nordea Danmark, Filial af Nordea Nordea Bank Abp, filial i Norge Bank Abp, Finland

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