Almost two months after its IPO, Angry Birds maker Rovio Entertainment today learned a painful lesson about life as a public company when investors battered its stock following an earnings report that failed to meet expectations.
Rovio missed on both profits and sales, which sent its stock down 18.87 percent in mid-day trading on the Helsinki exchange, dipping below its IPO price.
The company blamed increased spending on users for denting profits for the three months ending in September.
“In line with our growth strategy, we significantly increased our investments in user acquisition, which predictably led to a decline in profitability,” said Rovio CEO Kati Levoranta, in a statement. “Rovio’s successful listing on the Helsinki stock exchange at the end of September was evidence of the strong interest in our growth strategy, also in the capital markets.”
Indeed, user acquisition costs were up 308.7 percent in the quarter compared to the same quarter a year ago. As a result, operating profits tumbled 70 percent.
That investment did pay off in terms of revenues, which grew 41.2 percent in the quarter to $83.72 million, though less than analysts had projected.
Still, this offers some hope that the company can continue the turnaround that helped it regain momentum over the past two years. Levoranta said the company expects the massive spike in marketing this past quarter to pay off in terms of profits and revenues in about 8 to 10 months.