Ubisoft Earnings: Rebuilding Year Ends on Weak Note, but Core Franchises Will Drive Rebound in 2024

Ubisoft UBI posted a weak end to a rebuilding fiscal 2023 as net booking fell over 50% and the full-year non-IFRS operating fell dramatically to a record loss. Management expects fiscal 2024 to be a bounceback year with “strong growth” in net bookings and non-IFRS operating income of EUR 400 million. This growth is projected to be driven by a possibly overstuffed slate that includes a new installment of Assassin’s Creed, Avatar, mobile version of Rainbow Six, Skull and Bones, and four other titles. We remain concerned that Ubisoft may be overstretching its resources to support such a large slate.

We are lowering our fair value estimate to EUR 33 from EUR 35 to account for elevated royalties and higher marketing from the large slate.

Ubisoft’s fourth-quarter net bookings collapsed 53% to EUR 313 million as the firm had no new releases in the quarter. Full-year net bookings fell 18% to EUR 1.7 billion as Ubisoft delayed multiple titles in fiscal 2023. Despite the top line decline, the core franchises have enjoyed strong years as Assassin’s Creed Valhalla net bookings since launch were up 82% versus Origins and 61% versus Odyssey. Player recurring investment improved by 13% for the full year at Rainbow Six Siege and The Division 2 posted 36% net booking growth. The strength of the core franchises bodes well for next year with new version/titles from all three. Player recurring investment revenue (which includes microtransactions and DLC) grew 23% year over year and represented 58% of total net booking versus 38% in fiscal 2022 due in part to the smaller slate.

Non-IFRS operating income for the full year fell to a loss of EUR 500 million versus a gain of EUR 408 million last year due to lower bookings along with continued R&D. R&D will be elevated again next year as the slate should drive higher performance-based royalties and profit sharing. Marketing will also trend toward the higher end of its historical range to support the large number of launches.