Rovio shares crash 19% after Angry Birds maker’s disappointing first post-IPO earnings

Almost two months after its IPO, Angry Birds maker Rovio Entertainment learned a painful lesson today 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, and as a result, the stock was down 18.87 percent in mid-day trading on the Helsinki exchange as it dipped below its IPO price.

The company blamed increased spending on users for putting a dent in 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 still less than what analysts had projected.

Still, that offers some hope that the company can continue its 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 eight to ten months.

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