H1 FY14 Earnings presentation November 12, 2013 Yves Guillemot, - - PowerPoint PPT Presentation

H1 FY14 Earnings presentation

November 12, 2013

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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)).

D I S C L A I M E R Yves Guillemot, President and Chief Executive Officer Alain Martinez, Chief Financial Officer Jean-Benoît Roquette, SVP Investor Relations

AGENDA

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POSITIONED TO BE A NEXT-GEN WINNER H1 H2 & FY14 FY15

OPEN WORLDS, EVER-MORE DOMINANT

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Open worlds take an ever-bigger share of the market

in action-driving in action-adventure in RPG in FPS

OPEN WORLDS, EVER-MORE DOMINANT

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Open worlds will receive a MAJOR

BOOST with PS4 & XboxOne

OPEN WORLDS,

an IDEAL vehicle to implement the DIGITAL BREAKTHROUGHS

WHY OPEN WORLDS ARE SO APPEALING

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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

MASTERING

• f the DIGITAL

SKILLS

+ + +

=

HIGH

QUALITY

games

MAJOR

production

CAPACITY

WHAT’S NEEDED TO WIN NEXT GEN?

REGULAR

releases of

OPEN WORLDS

UBISOFT is READY to be a WINNER

• f this new generation

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8 000

LEAD & ASSOCIATE

proven organization

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DEVELOPERS UBISOFT IS READY: MAJOR PRODUCTION CAPACITY

UBISOFT IS READY: HIGH QUALITY GAMES

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3 in the top 7

best rated titles

Average Rating at

85

Based on Metacritic average ratings, all platforms included (exc. Wii & WiiU), as of November 08, 2013

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 6 FIFA 14 86 EA 7 Assassin's Creed 4 85 Ubisoft 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 14 Just Dance 2014 79 Ubisoft 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

CREATE MASSIVE

Ubisoft has been preparing for this

8 massive OPEN WORLDS

released in 7 years!

HUGE & well COORDINATED

production CAPACITIES

OPEN WORLDS

& LIVING

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UBISOFT IS READY: REGULAR RELEASES OF OPEN WORLDS

Ubisoft has been preparing for this LEVERAGING the EXPERIENCE accumulated over the last 4 YEARS Free to play – mobile – Facebook –

• nline platforms – digital distribution …

the Online & Social

BREAKTHROUGHS

DEEP INTEGRATION of

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UBISOFT IS READY: MASTERING OF THE DIGITAL SKILLS

LEVERAGING

the EXPERIENCE

Accumulated over the last 4 years

ANALYTICS

ALGORITHMS

BIG DATA 24/24 SERVERS

ACQUISITION ENGAGEMENT MONETIZATION BILLING STRUCTURE COMMUNITY MANAGEMENT

FREE TO PLAY

DIGITAL DISTRIBUTION CROSS PLATFORMS DIGITAL MARKETING

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KPIs

UBISOFT IS READY: MASTERING OF THE DIGITAL SKILLS

NEXTGEN : THE BEST OF CONSOLES AND ONLINE ENTERTAINMENT

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N°1 – Watch Dogs N°2 – The Division 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

"The Division. How Ubisoft is making the Next Generation’s hottest project"

EXPAND THE VISIBILITY OF OUR BRANDS

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Estimated 100 MILLION

VIEWERS in the US LEADER 6 times

• ut of 9 for 2-11 years
• ld category

LOWERS CPA*!

*Cost per acquisition

AGENDA

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POSITIONED TO BE A NEXT-GEN WINNER H1 H2 & FY14 FY15

H1 FY14

H1 Sales : 293 M€, +5% (+8% at constant exchange rates) Driven by back-catalog sales and digital Back-catalog : 113 M€, +16%

Solid sales from Far Cry 3 and Assassin’s Creed 3

Digital : 71 M€, +29%

24% of total sales Driven by digital distribution, sale of items and DLCs

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H1 FY14 : Sales

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H1 FY14 : Financial summary

H1 FY14

Gross margin flat at last year high level 69%

Supported by better back-catalog + solid digital gross margins

Non-IFRS Operating Loss : (98) M€ vs (58,2) M€

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

• 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).
• Income tax rate of 38%

H1 FY14 : Non-IFRS P&L

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€ 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) Net Financial Income (2,4) (2,1) Income Tax 38,2 22,2 Non-IFRS Net Income (62,1) (38,1) Non-IFRS Diluted EPS (0,59) (0,40) Nbr of shares fully diluted (000) 104 508 95 897

• 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

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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

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

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H1 FY14 : IFRS / non-IFRS reconciliation

€ million, except for per share data

H1 2013-14 H1 2012-13

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)

H1 FY14 : Cash flows and closing cash position

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• 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

€ 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)

AGENDA

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POSITIONED TO BE A NEXT-GEN WINNER H1 H2 & FY14 FY15

FY14 : TARGETS

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FY 14

Sales : 995 M€  1 045 M€ Non-IFRS Operating Loss : (70) M€  (40) M€ Q3 sales : between 500 M€ and 540 M€

ASSASSIN'S CREED 4 BLACK FLAG, ANOTHER MAJOR ENTRY IN THE FRANCHISE

““Black Flag’s world is built to amaze. The fantasy it delivers sets new benchmarks for open-world gaming” Edge, Nov. 2013

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The best rated Christmas title PS4, XboxOne, 360, PS3, WiiU, PC Lead/Associate studios : Montreal – Annecy – Singapore Quebec City – Sofia – Bucharest

“The most ambitious AC game in years, an incredible adventure by any standard” Gamespot, Nov. 2013

CASUAL: MANAGING THE TRANSITION

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Casual over 20% of total FY14 sales Great business : 7 very profitable years for Ubisoft Committed and adaptative approach Next generation to bring back casual gamers to living room

FISCAL Q4 : SOUTH PARK + RE-ORDERS OF NEXTGEN SKUS

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+

Re-orders of NextGen skus

FY14 DIGITAL/ONLINE : BROADER DISTRIBUTION AND STRONGER LINE-UP

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DIGITAL DISTRIBUTION PC FREE-TO-PLAY, eSPORT MOBILE & CONSOLE DIGITAL (Paymium & Free to Play) + DLCS FROM CONSOLES & PC GAMES

AGENDA

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POSITIONED TO BE A NEXT-GEN WINNER H1 H2 & FY14 FY15

FY15 : A significantly stronger line-up

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FY 15

Calendar 2014 : consoles market expected to grow again Much stronger line up for Ubisoft (franchises and new brands) Starting in Q1 with Watch Dogs Non-IFRS Operating Income : minimum 150 M€

APPENDICES

"We believe that our major production capacity, strong of a network of 26 international studios and

• ver 8 000 developers, now optimized

with our lead and associate

• rganization, will allow us to come

with an enhanced pipeline of increasingly high quality franchises and new IPs. We will be able to release

• ur franchises more and more

regularly, providing solid visibility on

• ur future revenue and profitability

streams.

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All that, combined with the Open-World and Online expertise/know-how that we have been growing steadily internally make us believe that we will benefit disproportionally from the arrival of the new generation and from the continued growth of the online market" Yves Guillemot, Ubisoft CEO

KEY LEARNINGS

FRANCHISES = LG TERM VISIBILITY KEY FACTORS OF SUCCESS – Quality – Regular Releases – Deep Production Capacity NEW CYCLES = OPPORTUNITY FOR NEW BRANDS

CURRENT GEN KEY SUCCESS FACTORS : QUALITY & REGULAR RELEASES

Physical retail sales : NPD, GFK

Cumulated WW Sales (value) XBOX360 / PS3 / WII / PC 2005-2012 (8 years) Publishers

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CALL OF DUTY ACTIVISION BLIZZARD F

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MARIO NINTENDO F

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FIFA SOCCER EA F

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WII FIT* NINTENDO NB

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ASSASSIN'S CREED UBISOFT NB

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GUITAR HERO* ACTIVISION BLIZZARD NB

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HALO MSFT F

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MADDEN NFL EA F

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THE SIMS EA F

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NEED FOR SPEED EA F

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BATTLEFIELD EA F

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JUST DANCE UBISOFT NB

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ROCK BAND EA NB

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MARIO KART WII NINTENDO F

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LEGO TELLTALE NB

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GRAND THEFT AUTO TAKE-TWO F

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WORLD OF WARCRAFT ACTIVISION BLIZZARD F

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WWF/WWE THQ F

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ELDER SCROLLS BETHESDA F

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SONIC SEGA F

1 BRAND IN THE TOP 5 ! 2 BRANDS IN THE TOP 12 ! 2 OF THE 4 BIGGEST NEW IPS !

*includes hardware

Far Cry – Watch Dogs – The Division – The Crew strong contenders for Next-Gen top 20

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F: Franchise NB: New Brands

33 Ubisoft Core brands Ubisoft Casual Brands

A highly committed, growing audience > 1 billion people

On consoles On PC, mobile, tablet (Free to Play model)

Social interactions

Value added for player

Multi-screens gaming Item based model

Grow ARPU and each brand’s profitability Ubisoft’s benefits

Drive players acquisition Increase players engagement & therefore monetization Expand to new territories (Asia, Turkey…) and to new platforms (mobile, tablet) Direct relation with player = knowledge (through analytics)

LONG TERM OPPORTUNITIES FOR OUR CORE AND CASUAL BRANDS

SYSTEMIC LOW BARRIERS ANALYTICS =

1 2 3 4 5

GAMEPLAY & SOCIAL TO ENTRY PERSONALIZED EXPERIENCE

BREAKTHROUGHS (details in appendices)

COOP

ONLINE & SOCIAL

USER GENERATED CONTENT

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5

The BEST and MOST LUCRATIVE online games are built on SOLID SYSTEMIC FOUNDATIONS

COMMON RESOURCES for INFINITE

entertainment combinations

SYSTEMIC

1 GAMEPLAY

• Huge world
• Retention
• LONG GAMING HOURS

LOWER development COST per hour played

ONLINE & SOCIAL

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PROGRESS and interact WITH FRIENDS

Requires Updates in real time (things 360 & PS3 could not do)

COOP

2 & SOCIAL

Players COME BACK REGULARLY to the world Players spend MORE TIME playing LOWER the COST Per Acquisition (CPA)

ONLINE & SOCIAL

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3

TRY for FREE and KEEP

your PROGRESS when you start to PAY

LOW BARRIERS TO ENTRY

Seamless & FRICTIONLESS ACCESSIBLE to non gamers Asynchronous, an EASY ACCESS to MULTIPLAYER COOL ASYNCHRONOUS,

WHENEVER with your FRIENDS

ULTRA-ACCESSIBLE :

• INSTANT-ON platforms
• MOBILE interfaces
• SMALL SESSIONS that add to A LOT OF TIME
• CROSS PLATFORM

ONLINE & SOCIAL

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MORE CONTENT

4 FROM UGC

ENHANCED

MODING & UGC due to cross platform SHARING & to ALWAYS ON

UGC CREATORS become

SUPER AMBASSADORS

(Lower Cost Per Acquisition)

INCREASES LIFESPAN

• f gaming experience

ONLINE & SOCIAL

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KNOW PLAYERS (profile, what they play, what interests them most), track their sessions

= Offer CONTENT that MEETS their NEEDS

ANALYTICS

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STRONGER

RELATIONSHIP with gamers a PERSONNALIZED experience increases ENGAGEMENT and RETENTION

TARGETED

MARKETING

ONLINE & SOCIAL

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