Morningstar | Ubisoft Ends FY19 With an in Line 2H; Four Major Titles in FY20 Including Next Ghost Recon
Ubisoft reported an in line end to fiscal 2019 with second-half net bookings of EUR 1.1 billion and annual net bookings of EUR 2.0 billion in line with guidance. The firm issued its fiscal 2020 guidance of EUR 2.2 billion in net bookings. Ubisoft expects to launch four AAA titles (Ghost Recon and three unspecified AAA titles) in fiscal 2020 with the three unknown titles launching in the fiscal fourth quarter. Skull & Bones was pushed out once again, now into fiscal 2021, as the developers continue to work on the pirate title that was originally to be launched in the fall of 2018. We maintain our narrow moat rating but plan to raise our EUR 66 fair value estimate by 5%-10% after accounting for new guidance and rolling our model.Ubisoft’s fourth-quarter revenue of EUR 516 million was down 5% year over year but net bookings grew 25% to EUR 676 million. The gap between the numbers is a result of the strong launch of The Division 2, an online persistent shooter the firm will be supporting for multiple years. Digital continues to expand in importance for the firm as annual revenue from digital distribution was up 38% year over year and now represents 69% of total revenue versus 58% in fiscal 2018, 50% in fiscal 2017, and 19% in fiscal 2014. Non-IFRS operating income margin for 2019 improved to 22.0% versus 17.3% in 2018 as the revenue growth outweighed increased development costs.
Growth in player recurring investment revenue (including microtransactions and DLC) remains a key driver in digital revenue growth as PRI was up 33% versus fiscal 2018 and now constitutes 32% of total revenue versus 28% a year ago. Ubisoft’s game as a service remains a potent driver for growth in PRI and in helping the firm become less dependent on current year releases. Back catalog titles generated 57% of net bookings in fiscal 2019, up from 48% in 2018 and 12% in 2010. We expect the impact of catalog to continue to grow as Ubisoft appears committed to support titles for multiple years.
Ubisoft Entertainment is an international independent developer, publisher & distributor of video games. Co. centers its business activities on developing, publishing & distributing video games for portable & home consoles, the PC, smartphones & tablets in both physical & online formats: high-definition with games for Xbox 360, PlayStation®3 & PC; casual with games for Nintendo®, KINECT & PlayStation®3 Move; and online for on-line games. Co.'s catalogue includes various types of games: Action/Adventure, Shooters, Sports, Strategy, Simulation, TV and Movie licenses, Games for everyone and Driving. Co.'s trademarks include Assassin's Creed®, Rainbow Six® Vegas 2, and Rayman Raving Rabids®.
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