H1 FY14 Earnings presentation November 12, 2013
Yves Guillemot, President and Chief Executive Officer Alain Martinez, Chief Financial Officer Jean-Benoît Roquette, SVP Investor Relations D I S C L A I M E R 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 25, 2013 with the French Financial Markets Authority ( l’Autorité des marchés financiers)). 2
AGENDA POSITIONED TO BE A NEXT-GEN WINNER H1 H2 & FY14 FY15 3
OPEN WORLDS, EVER-MORE DOMINANT in action-adventure in action-driving in RPG in FPS Open worlds take an ever- bigger share of the market 4
OPEN WORLDS, EVER-MORE DOMINANT Open worlds will receive a MAJOR BOOST with PS4 & XboxOne 5
WHY OPEN WORLDS ARE SO APPEALING OPEN WORLDS , an IDEAL vehicle to implement the DIGITAL BREAKTHROUGHS They ARE playing FIELDS SYSTEMIC and COOP/SOCIAL at their BEST Player is FREE to define his experience and how he interacts with friends LOW BARRIERS to entry as players play at their OWN RYTHM FLEXIBLE by essence EASIER to integrate UGC and to allow for PERSONNALIZED CONTENT 6
WHAT’S NEEDED TO WIN NEXT GEN? HIGH REGULAR MAJOR + + + MASTERING releases of QUALITY production of the DIGITAL OPEN WORLDS CAPACITY games SKILLS = UBISOFT is READY to be a WINNER of this new generation 7
UBISOFT IS READY: MAJOR PRODUCTION CAPACITY LEAD & 8 000 ASSOCIATE DEVELOPERS proven organization 8
UBISOFT IS READY: HIGH QUALITY GAMES Last 23 consoles titles Average Metacritic Developpers 1 GTA 5 97 TTWO 2 Rayman Legends 90 Ubisoft 3 Rocksmith 2014 88 Ubisoft 4 Diablo III 87 Activision 5 NBA 2K14 86 TTWO 3 in the top 7 6 FIFA 14 86 EA 7 Assassin's Creed 4 85 Ubisoft best rated titles 8 Lego Marvel Super Heroes 84 Warner 9 Skylander Swap Force 84 Activision 10 Battlefield 4 83 EA 11 Splinter Cell's Blacklist 83 Ubisoft 12 NHL 14 81 EA 13 Saints Row IV 81 Deep Silver Average Rating at 14 Just Dance 2014 79 Ubisoft 85 15 Madden NFL 25 78 EA 16 PES 14 78 Konami 17 WWE 2K14 77 TTWO 18 Call of Duty Ghosts 75 Activision 19 Disney Infinity 75 Disney 20 Batman: Arkham Origins 74 Warner 21 Beyond: Two Souls 71 Quantic Dream 22 The Bureau: Xcom Declassified 68 TTWO 23 Lost Planet 3 60 Capcom 9 Based on Metacritic average ratings, all platforms included (exc. Wii & WiiU), as of November 08, 2013
UBISOFT IS READY: REGULAR RELEASES OF OPEN WORLDS Ubisoft has been preparing for this 8 massive OPEN WORLDS CREATE MASSIVE & LIVING released in 7 years! OPEN WORLDS HUGE & well COORDINATED production CAPACITIES 10
UBISOFT IS READY: MASTERING OF THE DIGITAL SKILLS Ubisoft has been preparing for this DEEP INTEGRATION of LEVERAGING the EXPERIENCE accumulated over the last 4 YEARS the Online & Social BREAKTHROUGHS Free to play – mobile – Facebook – online platforms – digital distribution … 11
UBISOFT IS READY: MASTERING OF THE DIGITAL SKILLS ACQUISITION BIG 24/24 CROSS ENGAGEMENT DATA PLATFORMS SERVERS MONETIZATION LEVERAGING KPIs ANALYTICS the EXPERIENCE Accumulated over the COMMUNITY ALGORITHMS last 4 years MANAGEMENT FREE TO DIGITAL BILLING DIGITAL MARKETING STRUCTURE PLAY DISTRIBUTION 12
NEXTGEN : THE BEST OF CONSOLES AND ONLINE ENTERTAINMENT N ° 1 – Watch Dogs "The Division. How Ubisoft is making N ° 2 – The Division the Next Generation’s hottest project" Best Action Game – Watch Dogs Best New Franchise – The Division Best Racing Game – The Crew WatchDogs - The Crew - The Division Massive open world games that deeply and seamlessly integrate online and social innovations into their gameplay 13
EXPAND THE VISIBILITY OF OUR BRANDS Estimated 100 MILLION VIEWERS in the US LEADER 6 times out of 9 for 2-11 years old category LOWERS CPA*! 14 *Cost per acquisition
AGENDA POSITIONED TO BE A NEXT-GEN WINNER H1 H2 & FY14 FY15 15
H1 FY14 : Sales H1 Sales : 293 M € , +5% (+8% at constant exchange rates) Driven by back-catalog sales and digital H1 Back-catalog : 113 M € , +16% Solid sales from Far Cry 3 and Assassin’s Creed 3 FY14 Digital : 71 M € , +29% 24% of total sales Driven by digital distribution, sale of items and DLCs 16
H1 FY14 : Financial summary Gross margin flat at last year high level 69% Supported by better back-catalog + solid digital gross margins H1 Non-IFRS Operating Loss : (98) M € vs (58,2) M € FY14 A 42 M € increase in R&D due to higher depreciation of H1 titles + cancellation of projects Cash flow from operations : stable at (144,8) M € Reduced gap between R&D investments and R&D charges 17
H1 FY14 : Non-IFRS P&L € million, except for per share data H1 2013-14 H1 2012-13 % % Sales 293,3 279,2 Gross profit 202,2 68,9 192,7 69,0 R&D expenses (138,9) (47,4) (96,8) (34,7) Selling expenses (123,5) (42,1) (116,8) (41,8) G & A expenses (37,8) (12,9) (37,2) (13,3) SG & A expenses (161,3) (55,0) (154,0) (55,2) Non-IFRS operating income (98,0) (33,4) (58,1) (20,8) (2,4) (2,1) Net Financial Income 38,2 22,2 Income Tax (62,1) (38,1) Non-IFRS Net Income (0,59) (0,40) Non-IFRS Diluted EPS 104 508 95 897 Nbr of shares fully diluted (000) Gross margin up 10 M € and flat in percentage point Supported by better back catalogue and solid digital gross margins R&D up 42 M € , + 13 percentage point SG&A up 7 M € , flat in percentage point variable marketing expenses slightly up at 88 M € or 30% of sales (83 M € and 30% in H1 FY13). Lower than expected as some expenses related to the Q3 titles were moved to fiscal Q3. fixed structure costs slightly up at 73 M € or 25% of sales (71 M € and 25% in H1 FY13). 18 Income tax rate of 38%
H1 FY14 : R&D € million H1 2013-14 H1 2012-13 Depreciation of in-house software-related production 107,8 61,4 Depreciation of external software-related production and licenses 6,2 7,9 Royalties 9,7 12,8 Non Capitalized R&D & others 15,2 14,8 Total R&D depreciation and royalties 138,9 96,8 Capitalized in-house software-related production 189,8 171,5 Capitalized external software-related production and licenses 18,7 19,5 (excluding future commitments) Royalties 9,7 12,8 Non Capitalized R&D & others 15,2 14,8 Total development investment 233,3 218,5 45M € depreciation increase explains the 42M € increase in total R&D = higher depreciation of H1 titles + cancellation of projects Royalties down 3M € = lower casual sales 7% increase in total cash R&D, or +10% at constant exchange rate 19
H1 FY14 : IFRS / non-IFRS reconciliation H1 2013-14 H1 2012-13 € million, except for per share data IFRS Adjustment Non-IFRS IFRS Adjustment Non-IFRS Sales 293,3 293,3 279,2 279,2 Total Operating expenses (407,3) 16,0 (391,3) (339,5) 2,1 (337,4) Stock-based compensation (4,3) 4,3 0,0 (2,1) 2,1 0,0 Non-Current expenses and income (11,7) 11,7 0,0 0,0 0,0 Other operating income and expenses 0,0 0,0 0,0 0,0 0,0 Operating Income (114,0) 16,0 (98,0) (60,3) 2,1 (58,2) Net Financial income 13,4 (15,8) (2,4) 5,1 (7,2) (2,1) Income tax 38,2 0,0 38,2 22,9 (0,8) 22,2 Net Income (62,3) 0,2 (62,1) (32,3) (5,8) (38,1) Diluted earnings per share (0,60) 0,00 (0,59) (0,34) (0,06) (0,40) IFRS Non-Current expenses and income : (12) M € • Includes: 11.7 M € goodwill amortization and brand depreciation IFRS Net financial income : 13 M € • Includes: 4.4 M € profit on sale of Gameloft shares + 11.4 M € (non-cash) from adjustment of earn-out liabilities 20
H1 FY14 : Cash flows and closing cash position € million H1 2013-14 H1 2012-13 Opening cash position 104,5 84,6 Cash flows from operations (144,8) (146,4) Change in WCR (115,9) (98,4) Cash flows from operating activities (260,7) (244,8) Net investment in capital assets (16,3) (10,9) Net free cash flow (276,9) (255,7) Net acquisitions/disposals (3,0) (0,1) Proceeds from issue of capital and other financial flows 36,3 0,7 Disposal of Gameloft Shares 6,0 10,7 Effect of exchange rate fluctuations (8,7) 7,4 Decrease/(increase) in net debt (246,3) (237,0) Closing cash position (141,8) (152,4) Despite 40 M € drop in EBIT, Cash flows from Operations flat, reflecting reduced gap between R&D investments and R&D charges (94 M € vs 122 M € in H1 FY13) WCR increase due to Rayman and Splinter Cell releases at end of quarter 21
AGENDA POSITIONED TO BE A NEXT-GEN WINNER H1 H2 & FY14 FY15 22
FY14 : TARGETS Sales : 995 M € 1 045 M € FY Non-IFRS Operating Loss : (70) M € (40) M € 14 Q3 sales : between 500 M € and 540 M € 23
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