Ubisoft ((UBSFY)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Ubisoft’s Latest Earnings Call: A Positive Outlook Amidst Challenges
The recent earnings call for Ubisoft painted a picture of optimism, despite some hurdles. The company reported strong net booking performance and strategic achievements, notably the partnership with Tencent. However, challenges such as issues with Rainbow Six Siege and financial restatements were also highlighted. Overall, the strategic and financial improvements suggest a positive outlook for the company.
Strong Net Booking Performance
Ubisoft reported impressive net bookings of EUR 772 million for the first half of Fiscal Year 2026, marking a 20% increase year-on-year. The second quarter alone saw net bookings of EUR 491 million, a 39% rise compared to the previous year, surpassing the company’s guidance.
Strategic Partnership with Tencent
The strategic transaction with Tencent is nearing completion, expected to bring in EUR 1.16 billion in cash. This influx is set to bolster Ubisoft’s financial position and aid in reducing the company’s debt.
Assassin’s Creed Franchise Success
The Assassin’s Creed franchise continues to thrive, with 211 million session days recorded, a 35% increase over the average of the past two years. The franchise’s new expansions have been well-received, contributing to its ongoing success.
Innovation in Gaming Technology
Ubisoft is making significant advancements in gaming technology, particularly in the application of generative AI. These innovations are being applied to high-value use cases and player-facing applications, enhancing the gaming experience.
Improved Financial Metrics
The company reported a gross margin increase of over 3.5 percentage points year-on-year. Additionally, non-IFRS EBIT returned to a positive EUR 27 million, a notable improvement from the previous year’s loss.
Rainbow Six Siege Challenges
Despite acquiring new players, Rainbow Six Siege faced challenges due to a surge in cheating, which affected player activity and spending. Ubisoft is dedicating additional resources to address these issues.
Cash Flow and Debt Concerns
Ubisoft’s free cash flow was negative at EUR 251 million, and non-IFRS net debt stood at EUR 1.15 billion. Cash and cash equivalents decreased by EUR 265 million year-on-year, highlighting ongoing financial challenges.
Restatement of Financial Accounts
The restatement of FY25 accounts was necessary due to a new auditor’s stance on revenue recognition under IFRS 15. This restatement impacted the company’s leverage covenant ratios.
Forward-Looking Guidance
Ubisoft’s guidance for the future is cautiously optimistic. The company expects stable full-year net bookings and aims for breakeven non-IFRS operating income. Despite challenges with Rainbow Six Siege, Ubisoft anticipates a slight increase in Q3 net bookings, driven by new releases and partnerships. By March 2026, the company expects to maintain a strong cash position of around EUR 1.5 billion.
In summary, Ubisoft’s earnings call revealed a company navigating through challenges with strategic partnerships and technological innovations. The overall sentiment was positive, with strong financial performance and forward-looking guidance suggesting a promising future for Ubisoft.