Ubisoft 2010 Fiscal Results

Ubisoft has released its sales and earnings figures for the fiscal year that ended March 31, 2010.

Yves Guillemot, chief executive officer of Ubisoft, stated: "The global economic crisis had a pronounced impact on the video game industry in 2009, which contracted by nearly 10 percent year-over-year. Ubisoft’s sales were hit particularly hard, falling 18 percent over the full year despite stabilization in the second half of the year when figures came in on par with the corresponding period of 2008-09. This overall contraction in sales, combined with additional write-downs recorded for games already launched in addition to upcoming releases, led to a 60 M€ operating loss."

Sales for the fourth quarter of fiscal year 2009-10 came to €210 million, up 1.9 percent on the €206 million recorded for the same period of fiscal year 2008-09 (up 0.5 percent at constant exchange rates)

Full-year sales for fiscal year 2009-10 totaled €871 million versus €1,058 million for fiscal year 2008-09, representing a decrease of 17.7 percent (down 17.7 percent also at constant exchange rates).

Fourth-quarter sales were slightly higher than the guidance of around €200 million issued when Ubisoft released its sales figures for the third quarter of fiscal year 2009-10. This performance reflects the combined impact of:

The accounting restatement of around €8 million in marketing cooperation expenses. These costs were previously deducted directly from the top-line sales figure but are now included in SG&A expenses.

A strong increase in sales of Just Dance, which, in the total fiscal year, sold-in almost three million units. This performance was particularly impressive as the game was only available on one single platform – the Wii.

The ongoing exceptional performance delivered by Assassin’s Creed II, which sold-in nearly nine million units during the fiscal year.

The launch of Red Steel 2 for the Wii, which received very good reviews and whose performance was in line with recently revised forecasts.

Sales of Avatar that outstripped the most recent forecasts, notably on Wii.

During the first four months of calendar year 2010, Ubisoft’s gained market shares corresponding to 9.9 percent in Europe (versus 8.5 percent one year earlier) and 6.8 percent in the United States (against 5.3 percent).

Gross profit represented a lower percentage of sales in fiscal year 2009-10, coming in at 58.9 percent (€512.8 million) against 60.5 percent (€639.5 million) in fiscal year 2008-09. As previously announced, this contraction was primarily due to the sharp drop in back-catalog sales from €220 million (with a gross margin of around 50 percent) in 2008-09 to €110 million (with a negative gross margin of nearly 10 percent) in 2009-10. Back-catalog sales in 2009-10 were notably weighed down by the impact of excess inventories of DS games which Ubisoft had to clear or write down in a very competitive environment that was also marked by high levels of piracy.

Gross profit also suffered from the low number of games launches for the higher margin consoles, Xbox 360, PlayStation 3 and PC. This was particularly the case as gross margins for Xbox 360 and PlayStation 3 games rose year-on-year. Gross margins remained stable for Wii games.

Ubisoft ended the fiscal year with a €59.6 million current operating loss before stock-based compensation, a higher figure than the previously announced guidance of around €50 million. This difference was primarily attributable to additional write-downs recorded both for games launched during the year and for upcoming releases.

Ubisoft recorded an operating loss of €72.1 million in 2009-10 compared with operating income of €113.5 million for the previous fiscal year. The 2009-10 figure includes stock-based compensation of €12.1 million (€16.9 million in 2008-09).

Yves Guillemot stated: "We forecast a return to profitable growth in fiscal year 2010-11 with positive cash flow generation, driven by a games line-up that is more closely tailored to growth segments and based on strong franchises. We also expect to see the first concrete results from our investments in online games and services. Lastly, the upcoming launches of new consoles, including Project Natal and Sony Move, should enable us to capitalize on the technology investments that we have undertaken in recent years and re-energize the casual games segment."