Ubisoft Entertainment SA (UBI) Q3 FY2026 Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Ubisoft Q3 Fiscal Year 2026 Sales Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yves Guillemot, Ubisoft's Co-Founder and Chief Executive Officer. Please go ahead.

Welcome, everyone, and thank you for joining the call today. We delivered a solid third quarter performance with net bookings growing at a double-digit rate year-on-year, exceeding our expectations. This performance reflects the strength of our portfolio and the breadth of our player engagement across our core franchises, supported by recent releases and live content updates that continue to resonate with players. In parallel, we are making progress on the transformation announced last month. The allocation of studios and capabilities across the creative houses and network has now been announced and key leadership appointments are ongoing, including external hires of experienced respected industry veterans. This transformation is designed to sharpen focus, accelerate decision-making and elevate our creative ambition in an increasingly selective market. Vantage Studios has been operating since October, and we are preparing for the rest of this new operating model to start running in early April. As we move into this execution phase, our financial position and available cash provides the flexibility needed to address this near-term maturity. While we continue to work on extending our debt profile. This allows us to remain focused on delivering the transformation and creating the conditions for our creative houses to fully deliver on the significant pipeline of exceptional high-quality games we will have within the next 3 years. Importantly, this transformation is supported by the strongly improved retention and reinforced talent pool, thanks to the return of numerous skilled former Ubisoft employees in our studios over the recent years. Now I will transfer the call to Fr�d�rick.

Thank you, Yves, and hello, everybody. Over the first 9 months of the year, net bookings stood at EUR 1.1 billion, up 18% year-on-year, driven by the strength of our catalog of brands. Assassin's Creed and The Division both delivered nearly double net bookings over the period, while Anno posted a fourfold increase in net bookings and Avatar grew by around 20%. These 4 brands were also key drivers of the 12% year-on-year growth over Q3. In terms of activity metrics, the group's brands attracted around 130 million unique active users across console and PC in calendar year 2025, highlighting the appeal and strength of our portfolio of franchises. MAUs in Q3 reached 34 million, stable year-on-year, with activity metrics improving throughout the quarter. In December, MAUs were up 3% year-on-year. Our Q3 net bookings reached EUR 338 million, 11% above guidance. This overperformance was primarily driven by partnerships and the Assassin's Creed franchise. On the new release side, Anno 117: Pax Romana developed by our main studio had a solid start with an 84 Metacritic and net bookings outpacing those of Anno 1800 on a comparable time frame. The game has been well received by players and critics supported by its unique take on the iconic Roman setting and new gameplay features such as the skill tree. Looking ahead, while Anno 1800 continues to be a strong seller, Anno 117: Pax Romana will build on its post launch roadmap with the first DLC, Prophecies of ASH scheduled to release in April and introducing a large new island to discover. On the back-catalog side, net bookings reached EUR 297 million, up 11% year-over-year. Avatar: Frontiers of Pandora posted a solid performance this quarter, benefiting from the release of the high quality From the Ashes expansion, developed in our Massive studio that launched alongside the Avatar: Fire and Ash movie. This content with an 81 Metacritic score supported growth in player engagement with session days nearly doubling year-on-year as well as growth in player acquisition and monetization. Performance was further underpinned by targeted gameplay enhancement, including the highly anticipated introduction of a third-person view, broadening the player experience and positioning the game as a long-term seller. This quarter's competitive first-person shooter market was particularly crowded. In this context, Tom Clancy's Rainbow Six Siege performed in line with expectations. The title saw improving activity and engagement trends in December with MAUs up year-on-year and DAUs back on a positive momentum. By early January, DAUs were more than double where they stood early November, supported by the progress in addressing player feedback related to balancing and cheating. The Assassin's Creed brand overperformed this quarter and saw solid activity metrics with session days up 7% quarter-on-quarter and 28% year-on-year. Overall, the brand saw double-digit year-on-year growth in active users, underlining the strength and durability of the franchise. The quarter notably saw the release of Assassin's Creed Shadows on Switch 2, enabling the title to broaden its audience as well as the high-quality value of memory update for Assassin's Creed Mirage. The Division to continue to grow meaningfully across active players, engagement and revenue. This performance was driven by a strong slate of live events and the launch of a new season in December. Total digital net bookings reached EUR 256 million, stable year-on-year and represented 76% of our total net bookings. PRI stood at EUR 148 million, up 3% year-on-year and represented 44% of our total net bookings. Mobile amounted to EUR 25 million, down versus last year. Now turning to the group's transformation and bidding on what Yves just mentioned, we have made good progress over the past few weeks. We have provided the breakdown of studios by Creative Houses and Network that is detailed in today's press release. Additionally, as we prepare for this new organization to start operating in April, appointments of Creative Houses key leadership will start in March and include industry veterans with a proven track record. In line with our ambition to reshape the HQ into a leaner and focused organization, consultations with employee representatives has initiated regarding the objective to reduce headcount at Ubisoft headquarters in France by 200 positions through a voluntary departure plan. These measures are intended to support a more agile organization and reinforce our ability to deliver sustainable and profitable growth. Let me turn to a few key highlights from the quarter. First, as you know, we completed the transaction with Tencent, securing EUR 1.16 billion cash investment. The proceeds from the transaction has strengthened our balance sheet and provide increased financial flexibility to support the acceleration of our transformation while being fully available to address upcoming debt maturities. Second, in November, we unveiled Teammates, our first label player-facing generative AI experience. Building on the Neo NPC initiative, the prototype explores new forms of adaptive gameplay, with AI-driven characters capable of understanding and reacting to players in real time. The experience also serves as a testbed for the underlying technology, reinforcing our long-term strategy to enhance interactivity and creative tools for development teams. The announcement received positive media coverage, with DigitalTrends describing it as "Ubisoft's AI experiments that could be gaming's biggest leap in decades". Third, in December, we acquired the rights to March of Giants from Amazon for a nominal amount. Following a successful closed alpha, this acquisition enables us to enter in the MOBA genre, one of the biggest and most engagement segments of the industry, with a game that is fully aligned with our Game-as-a-Service native pillar of our strategy. The March of Giants team led by veteran developers of Ubisoft that created Rainbow Six Siege brings proven expertise in building and operating globally successful competitive and live games, strengthening our internal capabilities in this segment. And fourth, in January, we announced the appointment of Valentine Piedelievre-Eman as Chief Communication Officer. She brings extensive experience across entertainment and technology in the international organization, including most recently at Warner Bros. Discovery. Finally, turning to the outlook. We have confirmed today our fiscal '26 guidance. We expect net bookings of around EUR 1.5 million, non-IFRS EBIT of around minus EUR 1 billion, free cash flow of between minus EUR 400 million and minus EUR 500 million, non-IFRS net debt of between EUR 150 million and EUR 250 million. This translates into an expected consolidated cash and cash equivalents position at end March 2026 of between EUR 1.25 billion and EUR 1.35 billion that is fully available to service our debt maturities. Our liquidity position provides flexibility to address the near-term maturity using cash on hand, and we are actively exploring several options to extend our debt maturity profile. The lineup for Q4 includes Rainbow Six Mobile and The Division Resurgence. Rainbow Six Mobile developed by the Montr�al studio that created Rainbow Six Siege, brings the that Siege experience to mobile, combining tactical depths with fast-paced action while integrating gameplay features specifically designed for mobile users. The title that will expand the brand's audience has generated strong early momentum, with more than 18 million pre-registrations to date. Following a successful soft launch in LatAm, Canada, France and Poland, Rainbow Six Mobile is scheduled for worldwide release on February 23, with a strong content roadmap, including recurring challenges, limited-time playlists and events as well as the monthly release of a new season, supporting sustained player engagement. Following a solid Q3, Rainbow Six Siege saw MAUs grow mid-single digit in January. The game will also benefit from the Six Invitational that is taking place in Paris this week, where the franchise will present the Year 11 roadmap, highlighting increased investments in player protection and the delivery of community-driven content to support sustained engagement and growth. The Division Resurgence developed by Ubisoft Mobile Games in Paris was confirmed as a faithful mobile adaptation of the long-running and successful Division franchise following the latest series of live test in Q3. The game is planned to release in Q4, and we'll be taking part in the franchise's 10th anniversary celebrations in March, but we also featured the launch of a new game mode in The Division 2 alongside the reveal of an ambitious roadmap for the coming year. And as always, here are a few fiscal '26 housekeeping items for modeling purposes. The stock-based compensation is expected at around EUR 32 million, unchanged versus prior guidance. The non-IFRS net financial charge is expected at around EUR 45 million, unchanged versus prior guidance, reflecting the full year effect of last year's additional financing. The non-IFRS tax rate is not relevant in the context of negative non-IFRS operating income and the number of diluted shares is expected at around EUR 132 million, reflecting the fact that with an expected negative net income, the dilutive nature of our instrument no longer kicks in, also in change versus prior guidance. We are now ready to take your questions.

[Operator Instructions] And our first question today comes from the line of Nicolas Langlet from BNP Paribas.

I've got 3 questions. First, on the licensing deals. So you mentioned part of the overperformance related to the licensing deal. So what would have been the growth in Q3 if you exclude the licensing deals? And if you want to share any details about those deals, that would be appreciated. Secondly, on Assassin's Creed Shadows, can you share the performance of the Titan life to date compared to the previous large-scale Assassin's Creed? And if you can share any feedback regarding the performance on Switch 2, that would be great. And finally, on your cash position, what do you consider as the minimum vital gross cash position to run the business? And still on that topic, of the EUR 1.3 billion gross cash you expect at the end of the year, how much is part of Vantage Studio? And how much is part of the rest of Ubisoft? And how easy it is for you to use Vantage cash position for the rest of the business, if needed?

Thank you, Nicolas. So on your first question, the Q3 would have been slightly down without licensing deals. On Assassin's Creed Shadows, so overall, what we shared is that the brand is strongly benefiting from Shadows launch as we nearly doubled net bookings on the overall franchise over the first 9 months of the year and still strongly growing in Q3 with activity metrics up quarter-on-quarter. So we see that the brand is in good shape. And yes, the Switch 2 contributed to broadening the audience and to the performance in the third quarter. We've been happy to see that Assassin's Creed overperformed expectations in the last quarter. So that confirms that we've been clearly improving the game's quality delivery we shadows this year, and that is paying off. In terms of the minimum cash position, if we look at the usual working capital variations throughout the year, we can consider that a few hundred million euros is the minimum cash position to run the business. And to your question on cash availability, the full -- as I said, the EUR 1.25 billion to EUR 1.35 billion consolidated gross cash is fully available to service debt maturities, and that includes the Vantage Studio liquidity that is also unrestricted through cash pooling to service debt maturity. And to complete the answer, we have already upstreamed nearly EUR 700 million from Vantage Studio. So the rest being fully available through cash pooling.

We will now go to our next question. And the next question comes from the line of Ben Shelley from UBS.

My first one is you still have EUR 100 million of variance in your free cash flow and balance sheet guide for FY '26. Could you talk about what's driving that? And then could you also talk about will the revenues that were postponed by the restructuring be delivered in FY '27? And then my last question is, can you expand a bit further on your opening remarks where you say you continue to work on extending your debt profile? And can you outline what options you are considering?

Thank you, Ben. So on the first question, yes, the EUR 100 million variation in free cash flow guidance reflects a potential variation in working capital , and that can include potential cash in of a partnership. On your second question, you said revenues postponed by restructuring. I'm not sure I understand your question. Can you repeat the second question?

Yes. Will the revenues that were postponed by the restructuring and be delivered in FY '27, given they're not coming in FY '26?

So as part of what we did recently decided, there is one unannounced game that is postponed from fiscal '26 to fiscal '27. So that will be seen in fiscal '27. We, however, canceled a game this quarter. So we won't see that happening in fiscal '27. And in terms of the partnerships, as we said, we stopped negotiations on partnerships. And of course, we will have the leadership of the Creative Houses taking care of these future partnerships. But we have nothing more to announce in terms of timing or reasons for the conclusion of this partnership negotiations. On the -- in terms of refinancing, as I said, yes, we have clearly sufficient liquidity with cash on hand to address our near-term maturity and that gives us the flexibility to assess the most efficient refinancing options, indeed, to push our debt maturity for the medium- to longer-term maturities, but we have nothing more to precise at this stage.

[Operator Instructions] And our next question today comes from the line of Doug Creutz from TD Cowen.

If I look at your guidance for the year of about $1 billion (sic) [ EUR 1 billion ] loss, that implies also you're going to lose about $1 billion (sic) [ EUR 1 billion ] in the second half. That includes the EUR 650 million from the accelerated depreciation. But if I back that out, that still implies you're going to lose EUR 350 million on low EUR 700 million revenue. In the first half of the year, you were slightly profitable on high EUR 700 million revenue, which seems like that there's a big acceleration in costs embedded in there aside from the accelerated depreciation. So could you just walk through where that acceleration in cost run rate is in the second half versus the first half?

So in terms of the second half EBIT, yes, most of the loss came from the accelerated depreciation, as you say. And the rest comes from the fact that we reduced net bookings by EUR 350 million, and that comes with a EUR 330 million gross margin reduction. Apart from that, we've seen that we continue reducing our fixed cost base as we will be closing the second phase of our cost reduction program of EUR 100 million a year ahead of timing.

[Operator Instructions] I will now hand the call back to the room for closing remarks.

So thank you very much for your question, and have a good evening and a good morning for the other part of the Atlantic. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.