Ubisoft Q3 2020 Results – Fuelled by Microtransactions, Assassin’s Creed and More to Come?

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The current financial year has been a poor one for Ubisoft (EPA:UBI), of that there can be no doubt. This began with a quiet Q1 due to a lack of new titles and was only amplified in Q2/H1 thanks to the abysmal launch of Tom Clancy's Ghost Recon: Breakpoint. This failed launch resulted in the delay of practically every upcoming title by Ubisoft and this has naturally had an impact on the current quarter.

It should be clarified that the year has been poor for Ubisoft based on year-on-year figures. Q3 has seen net bookings of €455.5 million, down 24.8% on the same period last year, which saw net bookings of €605.8 million. Fortunately, this actually surpassed the guidance of €410 million set by the company in their previous earnings.

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With these figures, Ubisoft is sticking with original targets for the financial year ending March 2021, bringing in net bookings of around €1.45 billion, with the fourth quarter coming in at around €333 million, representing a 50% YoY fall. The back catalogue of the company has been a driving force over recent years, but none as prominent as this one.

CEO and co-founder Yves Guillemot had this to say:

Although the current fiscal year is well below our initial expectations, the third fiscal quarter saw excellent performances from several titles in our back catalog – particularly Rainbow Six Siege, Assassin’s Creed Odyssey, The Crew 2 and Mario + Rabbids Kingdom Battle – and from the release of Just Dance 2020, which is back on the growth track. The fact that our number of active players, MAUs and PRI on consoles and PC have remained stable year on year at high levels clearly demonstrates the depth of our game’s portfolio and the firmer resilience of our business model.

Ubisoft and the Tale of Back Catalog and PC

We've spoken at length about the lack of new releases in the current financial year by Ubisoft, the slack has had to be taken up by their back catalogue of titles, with expansions for prominent live service games like Tom Clancy's Rainbow Six Siege and For Honor. This has been no different, with the former now having over 55 million registered players, growth and a record high in PRI (player recurring investment. DLC, microtransactions, etc) during December 2019.

The interesting aspect of the quarter shows the changing of the guard in formats. The highest revenue earner for Ubisoft during Q3 was the PC, growing from 24% last year to 27% now. Over the nine-month period ending December 2019, the PC has also grown significantly, only placing slightly below the PlayStation 4. It shouldn't come as a large surprise that Uplay, Ubisoft's own digital store, has grown significantly and has seen increased revenue of 73% in the first nine months of the current financial year.

On this transformation, Yves Guillemot had this to say:

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Over the past ten years, the Group has radically transformed itself and delivered significant return on its investment. We achieved this by overhauling our portfolio, with a strong presence now in multiplayer games, esports and RPGs. By undertaking a deep-seated digital transformation, with an explosion in player engagement and PRI. By developing our expertise and infrastructure so as to offer best-in-class live experiences. By ramping up Uplay, which is now our fourth-leading digital platform in terms of sales. By releasing five profitable new brands and owning all of our franchises. And by delivering a powerful comeback for Assassin’s Creed, sustained growth for Far Cry and incredible success for Rainbow Six Siege–a best seller and one of the greatest esports games of the past five years. As a result, the number of hours played on our PC and console games increased from 2 billion in 2016 to 4.5 billion in 2019.

The Future's Bright

What this slow year has enabled Ubisoft to do is refocus and polish each of their upcoming titles to a diamond-like shine. A direct reaction to the shocking state and release of Ghost Recon Breakpoint, the company will have five AAA titles to release during the 2021 financial year. We have covered this announcement, but it should be stressed that with the delays these games have undergone, the company is pushing a lot on quality and banking on the outcome.

Predicted results for the 2021 Financial year, ending March 2021, comes in at €2.6bn of net bookings with an operating income of €600m. Titles like Watch Dogs Legion have already been delayed from the current financial year, so that can be expected. Other titles that can be expected are Gods & Monsters and Rainbow Six Quarantine. A new Assassin's Creed is well within the reasonable scope of imagination, likely featuring an October 2020 release date.

The adjustments that we are currently implementing will allow us to pursue this strategy going forward by continuing to create high-quality experiences and develop direct relationships with our player communities as well as seizing the numerous growth opportunities the industry has to offer.

One thing to take away is that while this year has certainly been slow for the french publisher, Ubisoft is planning for a mammoth FY 2021, coinciding with the launch of new consoles, and is certainly a company to keep an eye on, particularly with the launch of titles that have had that extra time and polish.

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