Ubisoft's operating income grows 40% as digital takes 50% of sales

Following the strong fiscal performances of Electronic Arts and Activision Blizzard, Ubisoft has released a positive earnings statement today as well. For the 2016-17 fiscal year ended on March 31, the French publisher enjoyed a 40.7% jump in Non-IFRS operating income to €237.7 million and a 4.7% increase in sales to €1.46 billion. Fourth quarter sales were also up 3.8% to €648.6 million.

Importantly, Ubisoft saw a significant improvement in its digital sales, totaling €729.3 million, which accounted for 50% of the publisher's total as compared to just 32% of the total from the previous fiscal year. Ubisoft also noted that its online engagement had improved with MAUs increasing almost 27%. The fourth quarter in particular was driven by two major franchises: Ghost Recon and new IP For Honor. Ubisoft said that Tom Clancy's Ghost Recon Wildlands was the industry's best-selling game since the beginning of 2017, with the Ghost Recon community growing about 60%, and For Honor was the industry's second best-selling game.

Yves Guillemot, Ubisoft CEO, commented, "The execution of our strategic plan fully paid off in 2016-17, with further very strong growth for the digital segment... and an ever-more recurring profile."

"With 44 million unique registered players, the size of the Tom Clancy community has increased by almost 150% in less than 18 months. This impressive performance for a brand created almost 20 years ago clearly illustrates the strong popularity of Ghost Recon Wildlands, Rainbow Six Siege and The Division. Our Live titles continue to beat records for player engagement and have seen a sharp rise in player recurring investment. Our results for 2016-17 demonstrate the success of our new model, with record high operating income and outperforming the target announced a year ago, and operating margin up for the third consecutive year."

"Over the last three fiscal years, Ubisoft has - with remarkable success - created numerous new brands and rebooted Rainbow Six and Ghost Recon. These successes have strengthened our visibility for the coming two fiscal years, with a line-up of releases principally comprised of established franchises. In 2017-18 we will see the exciting returns of Assassin's Creed, Far Cry, The Crew and South Park."

Apart from launching four AAA titles during this fiscal year, which should ship about 28 million units, Guillemot noted that 2018-19 will continue to see Ubisoft "pursue our digital transformation and consolidate our new business model, which is much more recurring and more profitable and is now significantly less exposed to new releases." Furthermore, he promised that, in the years ahead, his company would "catch up with our competitors in terms of player recurring investment, which represents huge value creation potential for our shareholders."

Ubisoft's initial guidance for the 2017-18 fiscal period is for sales of around €1.70 billion and non-IFRS operating income of around €270.0 million. Digital sales are expected to exceed 50% of the total and the back-catalog should generate over 40% of the total. Looking further out, Ubisoft has also revised its 2018-19 targets, which now show sales of €2.1 billion (compared to the previous target of €2.2 billion) and Non-IFRS operating income of €440.0 million, which is unchanged but Ubisoft does expect a slight increase in the non-IFRS operating margin target to 21.0% from 20.0%.