FY12 Earnings Presentation
May 15, 2012 Yves Guillemot, President and Chief Executive Officer
Alain Martinez, Chief Financial Officer
Jean-Benoît Roquette, Head of Investor Relations
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 28, 2011 with the French Financial Markets Authority (l’Autorité des marchés financiers)).
2 Summary
FY12 : Performance driven by strong performance from Just Dance, Assassin’s Creed and online/digital
FY12 : Operating income up 90%, at the top end of initial guidance
FY12 : Solid financial situation of 85 M€ with positive operating cash flows
FY12 : Continued investments in online opportunities and next generation of consoles
FY13 : A turning point
FY13 : Significantly stronger offer for core gamers + re-enters the shooter genre + continued online/digital
momentum
FY13 : Strong topline and profitability growth expected from core games and online/digital
FY13 : > 40% operating income growth based on midpoint of guidance
Longer term : Significant opportunities with next generation of consoles and Free-to-Play market 3 Agenda
FY12 performance
FY13, a turning point
Longer term
4 FY12 : Sales driven by Just Dance, Assassin’s Creed and Online/Digital
Sales : 1 061 M€, +4% at constant exchange rate
Total Core sales : 578 M€
Strong performance : Assassin’s Creed − Settlers Online Critical success : Driver San-Francisco − Rayman Origins
FY12 Total Casual sales : 483 M€
Strong performance : Just Dance − Howrse Successful launch : Rocksmith
Online/Digital (Core + Casual) sales : 80 M€, up 111%
5 FY12 : Sales
In million € Core Brands Casual Brands Total sales
FY11 600 438 1 038
FY12 578 483 1 061
FY12 vs FY11 -4% +10% +2%
Core & Casual In million € Core Retail Casual Retail Total sales Online/Digital
FY11 565 435 38 1 038
FY12 511 470 80 1 061
FY12 vs FY11 -10% +8% +111% +2%
6 FY12 : Margins continue to improve
Gross margin up almost 3 percentage points
Thanks to better online and back-catalog
Current operating income : 56 M€, +90%
Top end of guidance provided 12 months ago (40 M€ − 60 M€)
FY12
Solid Net cash position : 85 M€
Better than anticipated Operating Cash flows with continued :
Effective WCR management
Strong investment in future opportunities
7 FY12 : Profitability up
2011-12 2010-11
€ million % €m %
Sales 1 061,3 1 038,8
Gross profit 718,1 67,7 673,6 64,8
R&D expenses (348,4) 32,8 (363,5) 35,0
Selling expenses (238,4) 22,5 (212,9) 20,5
G&A expenses (75,3) 7,1 (67,9) 6,5
SG&A expenses (313,7) 29,6 (280,8) 27,0
Current operating income 56,0 5,3 29,4 2,8
. Gross margin up almost 3 percentage point and +44.5 M€ on +22.5 M€ sales . Continued improvement of back-catalog gross margin + online sales momentum
. R&D down 15.1 M€ . Lower depreciation due to fewer HD releases, partly compensated by . royalties increase (dance) and increase in online related expenses . Anticipated depreciation of a FY13 title for an amount similar to the 20 M€ that had been anticipated in FY11
. SG&A up 32.9 M€ . variable marketing expenses up at 177.1 M€ or 16.7% of sales (160.4 M€ and 15.4% in FY11). Related to dance and online growth. . fixed structure costs at 136.6 M€ or 12.9% of sales (120.3 M€ and 11.5% in FY11), due mostly to higher online related costs. 8 FY12 : Capitalized investments slightly up
€ million 2011-12 2010-11 Depreciation of in-house games 206,1 240,9 Depreciation of external games and licences 64,4 61,2 Royalties 51,2 45,1 Non Capitalized R&D & others 26,7 16,4 Total Current R&D depreciation and royalties 348,4 363,5 Total Non Current R&D 0,0 85,4 Total R&D depreciation and royalties 348,4 448,9
Capitalized software-related production 301,8 287,5 Investment in external production and licenses 48,1 51,5 (excluding future commitments) Royalties 51,2 45,1 Non Capitalized R&D & Others 26,7 16,4 Total development investment 427,7 400,4
. Depreciation down : 31.6 M€, due to product mix (less high-end releases), see prior slide
. Increase in royalties : dance titles
. Increase in Non Capitalized R&D : cash expenses related to ramping investments on online (new contents for released online games, etc…)
. 3% increase in internal and external capitalized investment
. Increased gap between current R&D depreciation and capitalized investments : +79 M€
. Capitalized R&D : stands at year end at 415 M€ vs 350 M€ 9 FY12 : Net Income up
€ million 2011-12 2010-11
Current operating income 56,0 29,4
Fair Value Variation 0,0 (1,4)
Stock-based compensation (10,4) (11,1)
Other revenues (expenses) 0,0 (97,4)
Operating income/(loss) 45,6 (80,5)
Net financial income/(expense) 2,5 ( 3,7)
Share of profit of associates 0,0 0,0
Net income tax (10,8) 32,1
Net income 37,3 (52,1)
Diluted earnings/(loss) per share (€) 0,39 (0,54)
Nbr of shares fully diluted 95 632 96 961
. Financial income of 2.5 M€ : . Interest charge: (2.5) M€ vs (5.0) M€ in FY11 . FY11 : a (3.6) M€ charge related to sell-off on tax credit . 8.5 M€ gains on GLFT shares (3.2 million shares sold, 3.2 million still owned) vs a 5,7 M€ gains in FY11 . Foreign exchange : (3.4) M€ vs (4.3) M€ loss in FY11
. Tax rate 18,4% excl. stock base compensation : impact Gameloft shares + various other tax adjustments
. Nbr of shares fully diluted : 95.6 million. As of today, no impact from Equity Line and BSAs 10 FY12 : Net income before non recurring elements and stock-based compensation
2011-12 2010-11
In million €, Before non recurring Before non recurring
except for per share data As reported Adjustment elements and stock As reported Adjustment elements and stock based based compensation compensation
Sales 1 061,3 1 061,3 1 038,8 1 038,8
Total Operating expenses ( 1 015,7) 10,4 ( 1 005,3) ( 1 119,3) 109,9 ( 1 009,5)
Stock-based compensation ( 10,4) 10,4 0,0 ( 12,6) 12,6 0,0
Fair Value Variation 0,0 0,0 0,0 ( 1,4) 1,4 0,0
Other operating income and expenses 0,0 0,0 0,0 ( 95,9) 95,9 0,0
Operating Income 45,6 10,4 56,0 ( 80,5) 109,8 29,3
Net Financial income 2,5 ( 8,5) ( 6,0) ( 3,7) ( 6,0) ( 9,7)
Income tax ( 10,8) ( 1,9) ( 12,6) 32,0 ( 30,3) 1,7
Net Income 37,3 0,0 37,4 ( 52,1) 73,5 21,4
Diluted earnings per share 0,39 0,00 0,39 ( 0,54) 0,76 0,22
11 FY12 : Closing cash position better than anticipated
€ million 2011-12 2010-11
Opening cash position 99,2 41,3
Cash flows from operations (27,0) 28,3
Change in WCR 35,2 25,9
Cash flows from operating activities 8,2 54,2
Net investment in capital assets (25,5) ( 22,0)
Net free cash flow (17,3) 32,2
Net acquisitions/disposals (17,5) ( 4,7)
Sale of Gameloft Shares 13,7 10,5
Proceeds from issue of capital and other financial flows (1,3) 1,5
Tax credit sales 0,0 21,9
Effect of exchange rate fluctuations 7,8 ( 3,4)
Decrease/(increase) in net debt (14,6) 57,9
Closing cash position 84,6 99,2
. Continued improvement of our WCR, down 35,2 M€ . Cash flows from operating activities decrease impacted by 62 M€ one-time events and tax related events . Impact from tax factoring : 20 M€ . Impact from tax reimbursement in FY11 : 13 M€ . Impact Canadian Subisdies factoring : 29 M€ . Excluding one time events, Cash flows from operating activities improved by 15.9 M€ 12 FY12 : Cash flows comparisons impacted by one-time events
€ million 2011-2012 2010-11
Cash flows from operations (27,0) 28,3 Year on year difference (55,3) Tax credit related to FY11 non current R&D charges (32,5)
Excluding one time events, Cash flows from operations year on year difference is (22.8) M€
€ million 2011-2012 2010-11
Change in WCR 35,2 25,9 Year on year difference 9,3 Impact of tax credit factoring (20,0) Impact of tax reimbursement in H1 FY11 (13,0) Impact of Canadian Subsidies Factoring initiated in FY11 (29.0) Impact of tax credit related to H1 FY11 non current R&D charges 32,5
Excluding one time events, WCR improvement is 38.8 M€
Excluding one time events and on a comparable basis, Cash flow from operating activities has improved by 15.9 M€ 13 Agenda
FY12 performance
FY13, a turning point
Longer term
14 FY13 : A turning point
Expectations
Sales : 1 160 M€ – 1 200 M€, up +9% to +13%
Gross margin : up 2 to 3 percentage points
Current Operating Income : 70 M€ – 90 M€, up +25% to +61%
Positive Operating Cash Flows
Key drivers FY13 Investments in versatile teams and online Bigger focus on huge AAA titles, integration of social benefits and item model
Lead / Associate studios organization
Impact
Significantly stronger offer for core gamers on HD consoles
Re-enters the shooter genre
Ongoing online/digital momentum 15
FY13 : Driven by core games and online/digital
In million € Core Brands Casual Brands Total sales
FY12 578 483 1 061
Material decrease FY13 Significant growth conservatively 1 160 – 1 200 budgeted
Core & Casual In million € Online/Digital
FY12 80
FY13 +80 / +100% growth
16 FY13 Core Games : Significantly stronger offer on HD consoles
A significant progression opportunity lies in front of Ubisoft
Ubisoft Core Games Sales HD consoles market software sales PS2 + Xbox + Xbox360 + PS3 Xbox360 + PS3 (sell-thru $ million) ($ million)
1 200 14 000
1 000 12 000
10 000 800
8 000 600
6 000
400 4 000
200 2 000
0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2012e
Ubisoft delivers its strongest line-up for core gamers in FY13 with Assassin's Creed 3, FarCry 3 and Ghost Recon Future Soldier 17 Excludes Asia. NPD, GFK, Chart-Track, Nielsen FY13 Core Games : Assassin's Creed 3, the biggest launch in Ubisoft’s history
"See, here's the thing about Assassin's Creed III: what we've seen looks terrific." Gamespot, March 2012
A new setting : The American Revolution (1753-1783)
A new hero with a tomahawk : Connor “Ratohnhaké:ton”, born of a white English
father and a Native American mother
AC core team and a new engine : creators of AC and AC 2, AnvilNext
Ubisoft’s record high pre-orders
Very ambitious, comprehensive and consistent marketing plan
Release date : October 30th (Xbox360, PS3, WiiU, PC)
"Silky smooth animation transitions, new wilderness environment traversal and gigantic crowd battle scenes are all testaments to Ubisoft Montreal’s technical imagination and expertise" Game Informer, March 2012 18 FY13 Core Games : Ubisoft re-enters the shooter category
Ubisoft re-enters the biggest segment of the industry
ShootMania Ghost Recon Online FarCry 3 Ghost Recon Future Soldier
20% Shooters 19%
RPG Shooters 35% 40% Driving RPG 15% Sport 40% Others Action Adventure 8% Others 15% 8%
The console opportunity The PC online opportunity 19
Internal estimates & NPD, GFK, Chart-Track, Nielsen FY13 Core Games : Ghost Recon Future Soldier
"Great though many of its competitors may be, few shooters think about combat as intelligently as Ghost Recon.” IGN, April 2012
Back in the shooter race : >12 hours solo + great 4 players coop and multiplayer
A fresh and highly impactful experience
True to the Ghost Recon franchise : realistic, teamwork
Multiplayer beta praised
The most pre-ordered Tom Clancy title in the US ever
Release date : May 22nd (Xbox360, PS3, PC)
“We’re downright excited!” Official Xbox Magazine, March 2012 20 FY13 Core Games : FarCry 3
“Seeing Far Cry 3 for the first time landed that game right near the top of my list of most anticipated games of 2012.” Gamespot, March 2012
A MONSTER game
Huge single and multiplayer
Deep social benefits integrated in the experience
Beautiful graphics
Big at E3 last year, huge at E3 this year
Great launch window : September 4th (Xbox360, PS3, PC)
“An open-world shooter you may be crazy about.” Edge, March 2012 21 FY13 Online/Digital : a strong growth and profitability driver
Make a difference in the online world = quality + brands’ reputation
Digital distribution growing momentum
First material revenues from our pure online titles
iOs/Android increased focus on free-to-play – Xbla/PSN …
+ Signicant improvement in DLCs revenues from our consoles shooters 22 FY13 Online/Digital : a strong growth and profitability driver
Ubisoft targets the fast growing Free to Play market
PC online games & wireless games CAGR 2011-15 Worldwide revenues ($ million) +11% 45 000 40 000 +15%
35 000
30 000
25 000 Wireless games 20 000 PC Online games
15 000
10 000
5 000
- 2009 2011 2013 2015
PWC estimates 2011 23 FY13 Online/Digital : pure online/digital games key highlights
. First Ubisoft organic success . A great acquisition
. Ubisoft BlueByte (Germany) . Ubisoft Owlient (France)
. PC Free to play . PC Free to play
. Already profitable and growing . Very profitable and growing
. Big eSport opportunity . Reconnect with a huge PC . A stepping stone in the audience Maniaplanet strategy . A cult shooter brand . Ubisoft Nadeo (France) . Ubisoft Singapore . PC Digital distribution & item based . PC Free to play . H2 2012 : Open beta . Coming months : Open beta 24 FY13 Online/Digital : pure online/digital games key highlights
. Players compete online
on PC and iPad . A hardcore brand . Might & Magic, a cult PC brand for a committed audience
. Ubisoft Quebec . Ubisoft Bluebyte (Germany)
. PC & iPad Free to play . PC Free to play
. Closed beta . Closed beta
. Highest grossing day-1 sales in Xbox LIVE Arcade history . 500k units after 3 weeks on 1 platform . A free to play AC on Gree’s worldwide iOs/Android platform . Ubisoft RedLynx (Finland) . Developped by Gree . Great multiplatform potential . To be released end 2012 for RedLynx brands . Released in April 2012 25 FY13 Casual Games : Prudent expectations, but many opportunities in front of us
Our guidance conservatively forecasts a drop in new sales and
back catalog sales for the JD franchise
Our goal is to continue to grow the brand with geographical
expansion, and new platforms like WiiU
26 FY13 Casual Games : Prudent expectations, but many opportunities in front of us
Material decrease conservatively forecasted
WiiU could provide a major boost
Marvel Avengers for WiiU and Kinect
Rocksmith to be launched in EMEA
Casual online revenues to grow
27 Agenda
FY12 performance
FY13, a turning point
Longer term
28 Long term opportunities for our core and casual brands
Ubisoft Core brands Ubisoft Casual Brands
For a highly committed For > 1 billion people and growing audience
On PC, smartphones, tablets On consoles On consoles Free to Play model
Analytics
Social benefits
Item based models
Connect through Uplay
Expand players acquisition
Expand geographical and platforms reach
Grow Revenues and ARPU
Grow each brand’s profitability 29 Core brands : Long term opportunities with the HD console market
Long term opportunities
The HD consoles thrives Players even more connected =
Market software sales Bring social benefits to them ($ billion) = 12 A growing ARPU! +40% 10 8 + 6
4 New HD consoles cycles = 2 Better graphics, more power 0 2005 2011 = Xbox + PS2 Xbox360 + PS3 Core players love it!
(incl. the Wii/Game Cube, growth is over 60%!) Ubisoft is getting ready for this 30 Excludes Asia. NPD, GFK, Chart-Track, Nielsen Core brands : Long term opportunities with the Free to Play model
Long term opportunities
1- Bring core brands to huge PC audiences previously unreachable
2- Expand core brands on mobile and tablet platforms
The Free to Play model adapts to ≠ purchasing power and consumption patterns 31 Casual brands : Long term opportunities
Long term opportunities
A unique capacity Many drivers to reach a huge audience to create regularly casual blockbusters
Over 80 million games sold! Over 1 billion players!
Proven formula for success with casual brands + free to play models = Huge opportunities for expansion on the casual market 32 Conclusion
Make a difference Capture with Ubisoft's unique capacity the long term growth to create great experiences of the videogame markets for both core
and casual audiences
Long term progression
33