UBISOFT® REPORTS FIRST-HALF 2013-14 SALES AND EARNINGS FIGURES

Ubisoft^® REPORTS FIRST-HALF 2013-14
SALES AND EARNINGS FIGURES

• First-half sales: €293 million  

• Non-IFRS operating loss: €98 million 

• Targets for full-year 2013-14 confirmed 

• Very high quality ratings for games released^[1]: average score of 85 for the five most recent titles   

Paris, November 12, 2013 - Today, Ubisoft released its sales and earnings figures for the six months ended September 30, 2013.

Non-IFRS income statement and key financial data

* Including royalties but excluding future commitments.

Sales

Sales for the first half of 2013-14 came to €293 million, up 5.0% (or 8.2% at constant exchange rates) compared with the €279 million recorded for first-half 2012-13.

Sales in the second quarter totaled €217 million versus €148 million in the same period of 2012-13, representing an increase of 46.6% (or 53.4% at constant exchange rates). Second-quarter 2013-14 sales were higher than the guidance of around €200 million issued when Ubisoft released its sales figures for the first quarter of the fiscal year.

Ubisoft's sales performance in first-half 2013-14 reflects:

• robust back-catalog sales, which rose 16% year on year to €113 million thanks to a good showing from Far Cry^® 3 and Assassin's Creed^® 3; and  

• sustained growth for the digital segment, with sales climbing 29% to €71 million, driven by digital distribution and sales of additional content (items and DLC).  

Main income statement items

Gross profit rose to €202.2 million in first-half 2013-14 from €192.7 million in the first six months of 2012-13. As a percentage of sales, it remained stable year on year (68.9% compared with 69.0% in first-half 2012-13).

Ubisoft ended the first half of 2013-14 with a non-IFRS operating loss of €98.0 million, versus a €58.2 million loss in the first six months of 2012-13.

The non-IFRS operating loss figure for the first half of 2013-14 reflects the following combined factors:

• A €9.5 million increase in gross profit.  

• A €42.1 million rise in R&D expenses to €138.9 million (47.4% of sales) from €96.8 million (34.7% of sales) in first-half 2012-13. This year-on-year increase was due to higher R&D depreciation for titles released in the first half of 2013-14 as well as the cancellation of projects. 

• A €7.3 million increase in total SG&A expenses to €161.3 million from €154.0 million in first-half 2012-13. As a percentage of sales these expenses remained stable at 55.0% (versus 55.2%):  

• Variable marketing expenses represented 30.0% of sales (€88.0 million) compared with 29.8% (€83.2 million) in the first six months of 2012-13. 

• Structure costs corresponded to 25.0% of sales (€73.2 million) against 25.3% (€70.8 million) in first-half 2012-13. 

Ubisoft recorded a non-IFRS net loss of €62.1 million for the first half of 2013-14, representing a non-IFRS diluted loss per share of €0.59, compared with a non-IFRS net loss of €38.1 million and a non-IFRS diluted loss per share of €0.40 in first-half 2012-13.

The IFRS net loss came to €62.3 million, representing an IFRS diluted loss per share of €0.60, versus an IFRS net loss of €32.3 million and an IFRS diluted loss per share of €0.34 for the first six months of 2012-13.

Main non-IFRS cash flow statement and balance sheet items

Non-IFRS cash flows from operating activities represented a net outflow of €260.7 million compared with a €244.9 million net outflow in first-half 2012-13. This reflects a negative €144.8 million in non-IFRS cash flow from operations (versus a negative €146.4 million in the same period of 2012-13) and a €115.9 million increase in non-IFRS working capital requirement (against a €98.4 million increase in first-half 2012-13).

At September 30, 2013 Ubisoft had net debt of €141.7 million compared with €152.5 million one year earlier. The swing from a net cash position of €104.6 million at March 31, 2013 was primarily attributable to a combination of the following factors:  

• The above-mentioned €260.7 million non-IFRS net cash outflow from operating activities.   

• €16.4 million in purchases of tangible and intangible assets. 

• €3.1 million in cash outflows for business acquisitions. 

• A €36.3 million inflow from capital increases. 

• €6.0 million from sales of Gameloft shares. 

• An €8.7 million negative translation adjustments.  

Outlook

Yves Guillemot, Chief Executive Officer, stated "The PS4 and Xbox One will be released in a few days' time and will be a new driving force for the industry. We are confident in our capacity to rise to the short-term challenges posed by the transition phase, thanks to the very high quality of our games, which, combined with the upcoming arrival of the next-generation consoles and the traditional ramp-up of sales during the Christmas season will trigger positive momentum towards the end of the year."

Yves Guillemot continued "Open world games are becoming ever-more popular with gamers. These creations give gamers the freedom of expression and immersive experiences that are now central to their expectations. This deep-seated market trend - which Ubisoft has fully embraced - is going to move up another gear when the next-generation consoles arrive. At the same time, the ongoing growth in our digital business demonstrates the progress we have made in an area which is set to expand even further in the coming years. Consequently, we are continuing to make strides in the implementation of our strategy, by concentrating our resources on regular releases of our open world franchises, investing in digital expertise and increasing the visibility of our brands, notably through movies and TV series."

He concluded by saying "This year, Ubisoft has constantly stood out for the very high quality of its creations. This will be a determining factor for ensuring our future success and enhancing our financial performance. In 2014-15, we intend to step up the level even further by launching a number of particularly ambitious titles under both new brands and established franchises, starting as of the first quarter of the fiscal year, with the release of Watch Dogs."

Full-year 2013-14
Ubisoft is standing by its recently-revised targets for full-year 2013-14, namely sales of between €995 million and €1,045 million and a non-IFRS operating loss of between €70 million and €40 million.

Sales for the third quarter of 2013-14
The third quarter of 2013-14 will see the following main releases:

• Assassin's Creed^® IV black flag^TM for Xbox 360(TM), PLAYSTATION^®3, Xbox One(TM),    PLAYSTATION^®4, Wii U(TM) and PC  

• Just Dance^® 2014 for Xbox 360(TM), PLAYSTATION^®3, Xbox One(TM), PLAYSTATION^®4, Wii^(TM) and Wii U(TM) 

• Rocksmith^® 2014 for Xbox 360(TM), PLAYSTATION^®3, PC and Mac 

Ubisoft expects third-quarter 2013-14 sales to amount to between €500 and €540 million, down by 38% to 33% on the third quarter of 2012-13, a period that notably saw the release of Far Cry^® 3.

Recent significant events

Ever-higher quality ratings: Assassin's Creed ^® IV black flag^TM (85); Rayman^® Legends (90); Rocksmith^® 2014 (88); Tom Clancy's Splinter Cell^® Blacklist^TM (83). These scores correspond to the average of the scores on Metacritic.com for all platforms combined (excl. Wii^(TM) and Wii U(TM)), as of November 08, 2013.

Market share: In the first nine months of calendar 2013, Ubisoft was the number 4 independent publisher in the United States with 5.4% market share (compared with number 4 and 6.4% one year earlier) and number 4 in Europe with 7.2% market share (compared with number 3 and 6.9%). Source : NPD, GFK Chart-Track.

Resolution to be submitted to the Company's shareholders on November 20, 2013 concerning the election of two new independent directors: At the Ordinary Shareholders' Meeting to be held on November 20, 2013 Ubisoft will ask its shareholders to elect the following two new independent directors:

• Pascale Mounier: Pascale Mounier would bring to the Board of Directors her strong command of IT and financial processes and methods, as well as her wide-ranging experience in a diverse spectrum of business sectors and an in-depth knowledge of project management, especially in the areas of IT, innovative technologies and R&D.  

• Didier Crespel: In addition to his financial and accounting expertise - which would enable the Audit Committee to have a member specializing in these areas - Didier Crespel would bring to the Board of Directors his skills relating to company transformations, as well as his extensive international experience and hands-on, entrepreneurial approach. 

Acquisition of Future Games of London: Future Games of London (FGOL) is a studio that is exclusively focused on developing free-to-play games for mobiles and tablets. It created and developed the Hungry Shark^TM brand, a franchise whose fourth installment has already been downloaded more than 30 million times since its launch. This studio - which is both successful and profitable - will help grow Ubisoft's mobile business.

Acquisition of Digital Chocolate's Barcelona studio's assets: This studio specializes in developing free-to-play social games and games for mobiles and tablets.

Exercise of share subscription warrants (BSA) issued in 2012: 97.4% of the warrants have been exercised, representing the issue of 8.4 million new shares and a €59 million increase in equity.

Sale of Ubisoft's remaining stake in Gameloft: During the second quarter of fiscal 2013-14, Ubisoft sold 1 million Gameloft shares, generating a capital gain of €4.4 million and a positive €6.0 million cash impact. Ubisoft no longer holds any Gameloft shares.  

Contact

Non-IFRS financial information
Ubisoft now presents non-IFRS information in its earnings releases as Group Management considers that "Non-IFRS operating income/(loss)" and "Non-IFRS net income/(loss)" - which are measures that are not prepared strictly in accordance with IFRS - are relevant indicators of the Group's operating and financial performance. Management uses them to run the Group's business as they are the best reflection of its recurring performance and exclude the majority of non-operating and non-recurring items. "Non-IFRS operating income/(loss)", "Non-IFRS net income/(loss)" and "Non-IFRS earnings/(loss) per share" are comparable to the following three previously-used indicators: "Current operating income/(loss) before stock-based compensation", "Net income/(loss) before non-recurring items and stock-based compensation" and "Earnings/(loss) per share before non-recurring items and stock-based compensation". A reconciliation between the IFRS and non-IFRS measures is provided in the appendices to this press release.

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 25, 2013 with the French Financial Markets Authority (l'Autorité des Marchés Financiers)).

About Ubisoft:

Ubisoft is a leading producer, publisher and distributor of interactive entertainment products worldwide and has grown considerably through a strong and diversified line-up of products and partnerships. Ubisoft has offices in 29 countries and has sales in more than 55 countries around the globe. It is committed to delivering high-quality, cutting-edge video game titles to consumers. For the 2012-13 fiscal year Ubisoft generated sales of €1,256 million. To learn more, please visit: www.ubisoftgroup.com.

© 2013 Ubisoft Entertainment. All rights Reserved. Just Dance, Watch Dogs, Fighter Within, Rayman, Rabbids, Panzer General, Horse Haven, Chubby Kings, Tom Clancy, Splinter Cell, Assassin's Creed, Far Cry, Blacklist, Black Flag, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. countries. The Settlers is a trademark of Ubisoft GmbH in the U.S. and/or other countries. Hungry Shark is a trademark of Future Games of London in the US and/or other countries. Future Games of london is a Ubisoft Entertainment company. Howrse and Dragow are trademarks of Owlient in the U.S. and/or other countries. Owlient is a Ubisoft Entertainment company. Flashback Origins © 2013 VECTORCELL. Art Assets excluding VECTORCELL elements © 2013 Ubisoft Entertainment. All Rights Reserved. Based on the Flashback franchise created by Paul Cuisset, owned by VECTORCELL and used by Ubisoft Entertaiment under license granted by VECTORCELL. Flashback is a trademark of VECTORCELL and is used under license.Babel Rising 3D  © 2011 Exequo. All Rights Reserved. Published and distributed by Ubisoft Entertainment under license from Exequo. Babel Rising is a trademark of Exequo and is used under license.

APPENDICES

The Statutory Auditors have completed the procedures for their limited review of the consolidated financial statements. They will issue their limited review report after verifying the Group's interim financial report.

Consolidated income statement (IFRS, reviewed)

Reconciliation of IFRS Net income and non-IFRS Net income

[1] Average of the scores on Metacritic.com for all platforms combined (excl. Wii(TM) and Wii U(TM)), as at November 08, 2013.