For the third fiscal quarter ending 12/31/22 Ubisoft (UBI.PA) reported revenue of €773 million on bookings of €727 million. Bookings were down 2.6% over the previous year. For the full year fiscal 2023 ending 3/31/23, Ubisoft expects bookings to be down more than 10% with operating income (loss) of -€500 million.
Analysis
Last month Ubisoft had prepared investors that results were going to be disappointing. The bookings forecast was lowered to €725 million based on less than expected performance of holiday titles. Also the key fourth-quarter title Skull and Bones was delayed again.
The company continues to try and do too much. There seems to be no business model or product category Ubisoft won’t try and chase. Fourth-quarter products include games on Amazon Luna and the first Netflix mobile game Valiant Hearts. This is part of a larger deal to create several animated series for Netflix.
Unfortunately, there is nothing in the fourth quarter lineup that will drive major sales growth. This means Ubisoft is going to be heavily dependent on back catalog products. However, for the latest quarter, back-catalog bookings were down 19%.
One interesting note from the third quarter results, mobile games were the leading platform and accounted for 43% of bookings versus only 7% in the previous third quarter ending 12/31/21. This is not a good sign as the mobile area appears to be more of another distraction. On the other hand, it could give Ubisoft a steady revenue base going forward.
Despite all these concerns, Ubisoft stock was included in the DFC Intelligence Video Game Stock Portfolio launched January 3, 2023. The rationale is that if Ubisoft has some hits the stock will soar. If the company continues to disappoint, the stock will decline but they would be a strong acquisition candidate.
Ubisoft has some strong brands, but the company lacks focus. One of the few positive signs was that active players for the Assassin’s Creed brand were up 30% over the past nine months. A product like the Nintendo-branded Mario + Rabbid Sparks of Hope was a quality title but a sales disappointment. The title is now widely available at a discounted price. If a company like Nintendo had been marketing the game, sales would have been significantly higher. For Ubisoft, it is about doing a better job of focusing on key products and not doing as many distracting side projects.
