Ubisoft H1 FY17 Earnings

Key insights

7 takeaways

01
Ubisoft’s H1 FY17 sales reached 281 million euros, a 36% year-over-year increase, driven by a strategic pivot toward recurring live services and multiplayer-centric titles.See it on page 17
02
Digital revenue surged 102% to 202 million euros, now accounting for 72% of the company's total revenue.See it on page 24
03
Recurring player investment grew by 132% to 95 million euros, signaling the success of long-term engagement models.See it on page 17
04
The company significantly improved its balance sheet, moving from a 156 million euro net debt in the prior year to a 38 million euro cash position.See it on page 22
05
Live operations are yielding measurable results, with Rainbow Six Siege surpassing 10 million registered users and The Division seeing a 51% engagement increase following its 1.4 update.See it on page 13
06
Operational efficiency improved, resulting in a 46 million euro increase in non-IFRS operating income and a six-point expansion in gross margin.See it on page 18
07
Ubisoft targets an operating margin of 14.3% to 15% for FY17, with long-term goals of 2.2 billion euros in revenue and a 20% operating margin by FY19.See it on page 24

Summary

Ubisoft’s H1 FY17 financial results highlight a strategic transition toward a more recurring and dependable business model, driven by digital growth and long-term player engagement. The company’s primary thesis centers on leveraging owned franchises to build persistent, high-margin revenue streams through live services, downloadable content, and recurring player investment. By shifting focus from traditional solo-centric titles to multiplayer-centric experiences, the company aims to increase profitability and stabilize performance across fiscal periods.

Financial performance for the first half of the fiscal year showed significant momentum, with sales reaching 281 million euros, a 36% increase year-over-year. Digital revenue was a primary catalyst, growing 102% to 202 million euros and accounting for 72% of total revenues. Recurring player investment saw a substantial rise of 132%, totaling 95 million euros. This growth, combined with disciplined cost management, resulted in a 46 million euro increase in non-IFRS operating income and a six-point improvement in gross margin. The company also reported a strengthened cash position of 38 million euros, compared to a net debt of 156 million euros in the prior year’s first half.

Operational success is attributed to the sustained engagement of key titles such as Tom Clancy’s Rainbow Six Siege and The Division. These games demonstrate the efficacy of live operations, with Rainbow Six Siege achieving over 10 million unique registered users and a 130% increase in Pro League viewership. Updates and patches have proven effective in driving player retention and monetization, as evidenced by the 51% increase in engagement following the 1.4 update for The Division. Looking forward, the company maintains a positive outlook for FY17, targeting an operating margin between 14.3% and 15%, while setting long-term goals for FY19 that include 2.2 billion euros in revenue and a 20% operating margin.