Ubisoft (EU:UBI) shares fell more than 4% on Friday after the company’s first-quarter results failed to convince investors that the strong commercial launch of Assassin’s Creed Black Flag Resynced would translate into improved financial guidance.
The French video game publisher reported first-quarter net bookings of €255.8 million, a decline of 9.2% compared with the same period last year. However, the figure was slightly ahead of both the company’s guidance of around €250 million and the market consensus of €254.8 million.
Performance was supported by a record quarter for Invincible: Guarding the Globe, while the remainder of Ubisoft’s portfolio, including Rainbow Six Siege, broadly met expectations.
Back catalogue weakness offsets recent game success
Revenue from Ubisoft’s back catalogue continued to weaken, with net bookings falling 15.1% to €221.0 million. Digital net bookings also declined 17.6% year-on-year to €206.2 million.
Investor attention quickly shifted to the company’s forward guidance. Ubisoft forecast second-quarter net bookings of approximately €370 million, well below analysts’ consensus estimate of €399.3 million, despite the reporting period including the launch of Assassin’s Creed Black Flag Resynced.
The company also left its full-year outlook unchanged, continuing to forecast a high single-digit percentage decline in net bookings, a high single-digit negative non-IFRS operating margin and free cash flow consumption of no more than €500 million.
Analysts question guidance after strong game launch
“This is where the numbers stop adding up,” Bernstein analyst Aleksander Peterc said.
He noted that Assassin’s Creed Black Flag Resynced sold 3.5 million copies during its first 14 days on sale and achieved an 84 rating on OpenCritic and Metacritic, the highest score for the Assassin’s Creed franchise since the original Black Flag launched in 2013. Ubisoft said the game had “already exceeded the annual expectations we had.”
According to Peterc, only around €15 million of Black Flag pre-shipments were recognised during the first quarter, meaning the title contributed only modestly to the reported financial results. He argued that maintaining second-quarter guidance below market expectations and leaving the full-year outlook unchanged appears difficult to reconcile with the game’s early commercial performance.
The analyst suggested that weaker trends across Ubisoft’s broader game portfolio and partnership activities may be offsetting the success of the latest Assassin’s Creed release.
“Our readthrough is that the group’s broader operational recovery remains unproven and highly reliant on a narrow set of hits,” Peterc wrote.
Restructuring strategy continues
Chief Executive Yves Guillemot said the performance of Assassin’s Creed Black Flag Resynced demonstrated the effectiveness of Ubisoft’s restructuring programme, cost reduction initiatives and strategy of concentrating development resources on larger franchises.
The company has reorganised its operations into five dedicated “creative houses”, each responsible for a specific category of games. The first of these, Vantage Studios, is backed by Tencent Holdings and oversees franchises including Assassin’s Creed, Far Cry and Rainbow Six.
Ubisoft continues to reduce costs across the business. Last month, the publisher announced the closure of its Winnipeg and Belgrade studios, together with the restructuring of its Barcelona operations.
After benefiting from exceptionally strong player engagement during the pandemic, Ubisoft has since faced increasing competition, development delays, technical issues and project cancellations, leading to multiple profit warnings. The company’s shares have fallen by almost 50% over the past 12 months.
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