Higher-than-expected first-half performance – Sales: €484 million – Non-IFRS operating income: €24 million
§ Targets for full-year 2014-15 and 2015-16 confirmed
Paris, October 30, 2014 – Today, Ubisoft released its sales and earnings figures for the six months ended September 30, 2014.
Non-IFRS income statement and key financial data
| In € millions | H1 2014-15 | % | H1 2013-14 | % | |
| Sales 484.2 293.3 Gross margin 378.1 78.1% 202.2 | 68.9% | ||||
| R&D expenses (181.2) -37.4% (138.9) | -47.4% | ||||
| Selling expenses (127.2) -26.3% (123.5) | -42.1% | ||||
| General and administrative expenses (45.6) -9.4% (37.8) | -12.9% | ||||
| Total SG&A expenses (172.8) -35.7% (161.3) | -55.0% | ||||
| Non IFRS operating income/(loss) 24.2 5.0% (98.0) Non-IFRS net income/(loss) 17.1 (62.1) Non-IFRS diluted earnings/(loss) per share (in €) 0.15 (0.59) | -33.4% | ||||
| Cash flows from operating activities* (19.5) (260.7) | |||||
| R&D investment expenditure** (250.0) (233.3) | |||||
| Net cash/(debt) position (40.3) (141.7) | |||||
| * Based on the consolidated cash flow statement for comparison with other industry players (non-audited) |
** Including royalties but excluding future commitments
Commenting on these results, Yves Guillemot, Chief Executive Officer, stated “The very strong momentum we saw at the beginning of the fiscal year carried on into the second quarter and enabled us to once again exceed our performance expectations. Ubisoft continued to capitalize on the popularity of new consoles, the successful launch of Watch Dogs, the quality of its back catalog and the considerable growth of the digital segment. Consequently, our operating income and cash flows improved significantly during the period.”
Sales
Sales for the first half of 2014-15 came to €484.2 million, up 65.1% (or 67.9% at constant exchange rates) compared with the €293.3 million recorded for first-half 2013-14.
Sales in the second quarter of 2014-15 totaled €124.1 million versus €217.7 million in the corresponding prior-year period, representing a decrease of 42.9% (or 45.2% at constant exchange rates). Second-quarter 2014-15 sales were higher than the target of approximately €85.0 million issued when Ubisoft released its sales figures for the first quarter of the fiscal year.
Ubisoft’s sales performance in first-half 2014-15 reflects:
- The ongoing success of Watch Dogs®, with more than 9 million units sold in.
- A 90.4% surge in digital segment revenues, which reached €134.7 million (27.8% of total sales), fueled by digital distribution, mobile operations and sales of items and DLC.
- A firm back catalog showing, stable at €113.7 million, thanks to the performance of Assassin’s Creed® Black Flag, South ParkTM: The Stick of TruthTM, Far Cry® 3 and Rayman® Legends.
Main income statement items
Gross margin represented a record 78.1% of sales (€378.1 million) in the first half of 2014-15, up from 68.9% (€202.2 million) for the first six months of 2013-14. This sharp improvement reflects the positive impact of the success of Ubisoft’s games and the increasing importance of the digital segment.
Ubisoft ended the first half of 2014-15 with non-IFRS operating income of €24.2 million, a significant improvement on the €98.0 million operating loss reported for the same period of 2013-14.
This year-on-year positive swing reflects the following combined factors:
- A €175.9 million increase in gross margin.
- A €42.2 million rise in R&D expenses to €181.2 million (37.4% of sales) from €138.9 million (47.4% of sales) in first-half 2013-14.
- An €11.5 million increase in SG&A expenses to €172.8 million (35.7% of sales) from €161.3 million (55.0% of sales) in the first six months of 2013-14:
− Variable marketing expenses represented 19.0% of sales (€91.9 million) compared with 30.0% (€88.0 million) in first-half 2013-14.
− Structure costs corresponded to 16.7% of sales (€80.8 million) against 25.0% (€73.2 million).
Ubisoft recorded non-IFRS net income of €17.1 million for the first half of 2014-15, representing non-IFRS diluted earnings per share of €0.15, compared with a non-IFRS net loss of €62.1 million and a non-IFRS diluted loss per share of €0.59 in first-half 2013-14.
IFRS net income came to €11.7 million, representing IFRS diluted earnings per share of €0.10, versus an IFRS net loss of €62.3 million and an IFRS diluted loss per share of €0.60 for the first six months of 2013-14.
Main cash flow statement[1] and balance sheet items
Cash flows from operating activities represented a net outflow of €19.5 million compared with a €260.7 million net outflow in first-half 2013-14. This reflects a negative €37.5 million in cash flow from operations (versus a negative €144.7 million in the same period of 2013-14) and an €17.9 million reduction in working capital requirement (against a €115.9 million increase in first-half 2013-14).
As of September 30, 2014, Ubisoft had net debt of €40.3 million versus €141.8 million one year earlier. The increase compared with the net debt position of €12.7 million as of March 31, 2014 was primarily attributable to:
- The above-mentioned €19.5 million net cash outflow from operating activities.
- €28.1 million in purchases of tangible and intangible assets.
- €2.3 million in cash outflows for business acquisitions.
- A €7.5 million inflow from equity increases.
- €14.9 million in positive translation adjustments.
Outlook
Yves Guillemot stated “Our performance in the first half of the fiscal year has strengthened our confidence that we will reach our annual targets. It demonstrates that our strategy of creating strong brands and investing in digital is paying off. This strategy is underpinned by a creative force of an unrivaled scale as well as constantly enhanced execution. It has positioned us at the forefront of the new console cycle and will be a determining factor in creating value for our shareholders in the short, medium, and long term.”
He concluded by saying “We also are standing by our target for 2015-16.“
Full-year 2014-15
Ubisoft is standing by its previously-announced targets for full-year 2014-15, namely sales of at least €1,400 million and non-IFRS operating income of at least €150 million.
Sales for the third quarter of 2014-15
The third quarter of 2014-15 will see the following main releases:
- Assassin’s Creed® Unity for Xbox One™, PLAYSTATION®4 and PC
- Assassin’s Creed® Rogue for PLAYSTATION®3 and Xbox 360™
- Far Cry® 4 for PLAYSTATION®4, Xbox One™, PC, PLAYSTATION®3 and Xbox 360™
- Just Dance® 2015 for PLAYSTATION®4, Xbox One™, PLAYSTATION®3, Xbox 360™,
™ ™
Wii and Wii U
- The Crew™ for PLAYSTATION®4, Xbox One™, PC and Xbox 360™
Ubisoft expects third-quarter 2014-15 sales to amount to around €730 million, up by 40% on the third quarter of 2013-14.
Full-year 2015-16
Ubisoft confirms that it expects its non-IFRS operating income to amount to at least €200 million for full-year 2015-16.
Recent significant events
Market share: In the first nine months of calendar 2014, Ubisoft was the number 3 independent publisher in the United States with 10.0% market share (compared with number 4 and 5.4% one year earlier) and number 3 in Europe with 12.3% market share (compared with number 3 and 7.2%). Source: NPD and GFK.
Contact
Investor relations
Jean-Benoît Roquette
SVP Investor Relations
+ 33 1 48 18 52 39
Jean-benoit.roquette@ubisoft.com
Non-IFRS financial information
Ubisoft considers that “Non-IFRS operating income/(loss)” and “Non-IFRS net income/(loss)” – which are measures that are not prepared strictly in accordance with IFRS – are relevant indicators of the Group’s operating and financial performance. Management uses them to run the Group’s business as they are the best reflection of its recurring performance and exclude the majority of non-operating and non-recurring items. A reconciliation between the IFRS and non-IFRS measures is provided in the appendices to this press release.
Disclaimer
This statement may contain estimated financial data, information on future projects and transactions and future business results/performance. Such forward-looking data are provided for estimation purposes only. They are subject to market risks and uncertainties and may vary significantly compared with the actual results that will be published. The estimated financial data have been presented to the Board of Directors and have not been audited by the Statutory Auditors. (Additional information is specified in the most recent Ubisoft Registration Document filed on June 26, 2014 with the French Financial Markets Authority (l’Autorité des Marchés Financiers)).
About Ubisoft
Ubisoft is a leading creator, publisher, and distributor of interactive entertainment and services, with a rich portfolio of world-renowned brands, including Assassin’s Creed, Just Dance, Tom Clancy’s video game series, Rayman, Far Cry, and Watch Dogs. The teams throughout Ubisoft’s worldwide network of studios and business offices are committed to delivering original and memorable gaming experiences across all popular platforms, including consoles, mobile phones, tablets, and PCs. For the 2013-14 fiscal year Ubisoft generated sales of €1,007 million. To learn more, please visit www.ubisoftgroup.com.
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[1] Based on the consolidated cash flow statement for comparison with other industry players (non-audited)