Ubisoft Annual Financial Results Report Net Bookings Decline and Massive Corporate Restructuring Including Workforce Reductions and Portfolio Streamlining to Secure Future Cash Flow
Ubisoft's annual financial results were published and detail the large scale restructuring operation the company has initiated in an effort to secure its long term cash flow. As it stands in the official Ubisoft earnings release, net bookings for the year were reported to be 1,525,100,000 euros, or down 17.4% compared to last year. Booking figures may be low this year due to the light release schedule, but for Q4 net bookings reached 415,000,000 euros, thanks to a strong back catalog performance that surpassed corporate guidance of 390,000,000 euros.
The company reported IFRS 15 sales of 1,395,700,000 euros, a 21.8% drop from last year. IFRS operating losses were heavy with IFRS operating income coming in at negative 1,322,300,000 euros. Non IFRS operating losses were 1,044,700,000 euros. The balance sheet is more secure after a strategic transaction with Tencent, which has brought the group 1,160,000,000 euros in cash, allowing for its net debt to be reduced to 187,000,000 euros.
Ubisoft’s leadership decided in the wake of the financial difficulties to undertake an extensive portfolio review, resulting in the cancellation of 7 unannounced games and 6 postponed games. The company is in the process of downsizing its fixed cost base, having saved 118,000,000 euros this year already with a target of saving 500,000,000 euros by the end of Q1 next biennial cycle. The measures taken have affected the workforce significantly, as total personnel numbers have dropped by 1,200 employees down to 16,590.
The last fiscal year was one of strong decision making. Ubisoft leadership has stated,
"We initiated one of the most ambitious transformations in the company's history, building a more focused, agile and disciplined organization that is capable of consistently delivering high quality experiences to players."
In relation to these operational changes several creative leaders have also been announced, with Joint chief executives leading Vantage Studios to manage the flagship Assassin's Creed series. Strategic advisor Nicolo Laurent has joined the studios to oversee competitive and live service operations, while Creative Houses 3 and 5 have been taken over by Julien Bares.
Live services provided a boost to Ubisoft’s overall player numbers, with several of their properties continuing to receive a lot of attention. Tom Clancy's Rainbow Six Siege now has more than 30,000,000 unique active players, as well as more than 10,000,000 monthly active players at its peak in March. Net bookings have more than doubled in the year for Tom Clancy's The Division 2, due to the celebration of its 10th Anniversary. More than 30,000,000 players remain active across the Assassin's Creed series, while Avatar: Frontiers of Pandora also performed strongly with significant increases in both sales numbers and perspective updates for its recently launched DLC, which also brought the addition of a new story experience.
On the mobile front Invincible: Guarding the Globe net bookings jumped over 50% year over year, boosted by the launch of its associated tv series, and Rainbow Six Mobile and The Division Resurgence also launched with good reception from the community although it has been acknowledged that player acquisition for these titles was slow, and developments continue in that regard. In terms of tech Ubisoft continues to expand into artificial intelligence by accelerating its investments into what it is calling "Teammates," its first playable generative AI experience which will boost the responsiveness of in game non player characters as well as help out quality control.
Free cash flow is expected to remain at a low point for the current fiscal year due to operational restructuring. The coming year for Ubisoft is lighter in terms of its release slate but will see a complete remake of Assassin's Creed Black Flag Resynced by Ubisoft Singapore utilizing the new Anvil engine. Early pre orders for the remake were strong especially within China. Heroes of Might and Magic: Olden Era also entered early access in the coming year, receiving an 88% positive review on Steam.
Management sees a major jump in the financial performance beyond this upcoming transition period to positive free cash flow and non IFRS EBIT thanks to a vastly expanded content pipeline over the course of the next two biennial cycles, with massive franchise titles coming from Assassin's Creed, Far Cry and Ghost Recon. The company believes this streamlined and focused portfolio will ensure a quick return to profitably and improve its capital structure in the long term.
