Good day, welcome to the Ubisoft FY 2020 Earnings Call. At this time, I would like to turn the conference over to Mr. Guillemot. Please go ahead, sir.
Welcome everyone, and thank you for joining the call today. People around the world are facing a global health and economic crisis. I would like to offer the sympathies of all of us at Ubisoft to those who have been adversely affected by this crisis. We extend our gratitude to healthcare workers and everyone else working to combat the virus and restore a sense of normalcy to our lives. I also want to sincerely thank all Ubisoft teams. Their health and well-being remain our priority, and they have adapted admirably to these challenging times, as well as managed to remain highly focused and productive. Our teams have found extra motivation in video games' ability to deliver release and joy to billions of people, and to help them stay connected with their communities.
In those difficult times, they have notably delivered plenty of free operations. They plan to continue doing so in the coming months. In many respects, confinement highlighted the best qualities of video games, including offering nearly unlimited content, deeply needed social interactions, and new forms of activity and education. Ubisoft's stated mission to enrich players' lives has never been as important as during those unsettling times. With our deep and diverse portfolio of franchises, we have been able to offer players of every age and preference, great ways to escape.
From the most engaged fans with "Rainbow Six Siege," "Assassin's Creed Odyssey," and "The Division 2," to kids and families with "Just Dance," "Mario + Rabbids Kingdom Battle," "Rayman Legends," and more casual titles like "Monopoly," "UNO," and "Hungry Shark." On top of helping to take care of our employees and players, the major focus for our organization this quarter has been production. Ubisoft's culture of deep collaboration, the flexibility and efficiency provided by our network of international studios, and the amazing work from our IT teams, have been key to reacting rapidly to the challenges of working from home. Looking at our strong Q4 performance, we already had built solid momentum in the first 10 weeks of the quarter, prior to much of the world's extended stay-at-home ordinances, which had a further positive impact on engagement. Our team's execution, notably on our live games, has indeed been remarkably strong.
For example, "Rainbow Six Siege" and "Assassin's Creed Odyssey" confirmed their strong dynamic, and we also were pleased by gamers' very favorable reception to the major updates made to "The Division 2" update. The game had an impressive reverse of momentum during the quarter, and its performance is now on par with "Assassin's Creed Odyssey" after 13 months, which is an impressive benchmark. Therefore, the quarter confirmed in striking fashion the strength of our live services, our PRI momentum, and our capacity to engage with our communities even without new releases. We benefit from a deep portfolio of strong franchises on which we can rely on growth.
If we take a step back and look at our performance during this console generation, "Assassin's Creed Unity," "Origins," "Assassin's Creed Odyssey," "The Division 1 and 2," "Far Cry 4 and 5," "Ghost Recon Wildlands," "Rainbow Six Siege," "Watch Dogs 1 and Watch Dogs 2," all sold more than 10 million units. During the prior generation, only the "Assassin's Creed" franchise, and "Far Cry 3" reached these levels. This shows how far we have come in deepening and strengthening our portfolio of franchises over the past seven years. This provides us with great confidence as we enter the new generation console cycle, with significantly stronger creative and production firepower, franchises, and live services capabilities. Leveraging those strong pillars, we believe we are in a position to deliver our initial operating income target of EUR 600 million in fiscal year 2021.
This notably relies on our current excellent momentum on PRI and back catalog, as well as the most ambitious lineup of the industry over the period. The COVID-19 crisis has brought external uncertainties. The transition to work from home means we have been facing some challenges in areas like motion capture, localization, voice recording, and testing, which had an impact of few weeks of production. Our teams are finding and implementing innovative solutions to those challenges, only time will tell if we can continue to maintain our release plan. On top of those production-related topics, other related external uncertainties are arising, including the potential impact of the economic crisis on our business partners and on people's consumption.
To account for the potential impact of those external uncertainties, we have decided to introduce a range in our target for financial year 2021 to provide as much visibility as possible on the different estimated outcomes. This takes into account the possibility of having one of our 5 AAAs move to fiscal year 2022, if needed, to maximize the potential of our lineup. Frédérick will detail the different assumptions. I will now let him detail our Q4 and the full-year performance.
Hello, everybody. I will first provide details on some of our responses to the COVID-19 crisis. As Yves said, the health and safety of our teams and their family has been our priority. We have been notably providing them with logistical material and psychological support at the group and local levels. We have offered ways for our players to stay engaged and entertained during this period, including through special offers. For example, in April, we launched the Play Your Part, Play at Home campaign. Through this campaign, we gave away three beloved games, "Child of Light," "Rayman Legends," and "Assassin's Creed II," which have been downloaded 9 million times in total. With many children unable to attend school, our educational resources and games have seen renewed interest among our communities.
Teachers are using "Assassin's Creed Odyssey Discovery Tour: Ancient Greece" to give their students virtual history lessons while our free "Rabbids" coding game provides a fun way for kids to learn to code. As of today, and until May the 21st, both Discovery Tour: Ancient Greece and Ancient Egypt are available to download for free on PC via Uplay. Our different Ubisoft offices and our teams have also been showing amazing commitment and care to their communities. They have been highly engaged and donated to a variety of local organizations, such as hospitals and food banks, to help the communities where we do business. Looking now at our Q4 performance, I would like first to mention we applied a new classification for mobile revenue in line with industry practice.
We are now booking revenue gross of platform fees and netting them at the cost of goods sold level with no change to underlying profits. As the impact represents EUR 29 million and less than 2% of our revenue, we have decided to apply the full-year impact on Q4 and not to restate our past year in agreement with our auditors. The slideshow posted on our investor relations website provides our performance before and after this reclassification. For the sake of comparability, I will base all my comments today before that reclassification to ensure a like-for-like comparison with fiscal 2019. Our Q4 net bookings reached EUR 388 million, down 43% year-on-year, but nicely above our target of approximately EUR 333 million. Full-year net bookings reached EUR 1.505 billion, down 26%.
As Yves noted, while we saw clear growth in engagement from mid-March, we already were operating at a faster pace than initially anticipated.
With over 2/3 of our EUR 55 million Q4 outperformance happening in the first 10 weeks of the quarter. The rest of the gain came from a mix of organic strengths and from the increased engagement related to confinement. This dynamic was felt across the board with strong performance from our full portfolio as well as great trends on digital and PRI. It was notably driven by strong execution and intense activity across our games with well-received new updates, impactful esports events, and very effective players acquisition strategies. Among those games, The Division 2 delivered a very strong comeback. With the release of Warlords of New York, The Division 2 had a very busy quarter with deep gameplay updates, a massive expansion bringing free and paid new content updates, and a very attractive promotion. As a result, we saw a significant increase in acquisition, engagement, and PRI KPIs.
MAUs tripled versus January and reached record levels in February and March. The game was the second-best contributor to Ubisoft's PRI revenue over the full -year. As Yves said, after 13 months, its overall performance is on par with Assassin's Creed Odyssey. Rainbow Six Siege momentum continued to be amazing during the quarter despite huge competition. Acquisition keeps up at a very healthy rate with 60 million registered players as of today.
We saw record levels of engagement for January, February, and March months. Engagement passed the 1 billion session days over the year, and the introduction of the battle pass contributed to incremental growth of engagement and PRI. The game achieved a 15% growth in PRI over the full -year, with an acceleration in Q4 up 26%. After four years of growth, esports continues to thrive, with a 30% year-on-year increase in total watch time over the Six Invitational events.
For the first time ever, Siege was ranked in the top tier most impactful PC titles in the Esports Observer quarterly ranking among "League of Legends," "Dota," and "Counter-Strike." GameSpot decided to review the game again and gave it a perfect 10 out of 10 score, stating, "Rainbow Six Siege has become one of the best first-person shooters ever made." Others confirmed the game's progressive and impressive ramp-up as one of the industry's leading games. "Assassin's Creed Odyssey" keeps surprising us on the upside, generating 35% more active players in fiscal 2020 than in fiscal 2019. Additionally, we saw another spike this quarter in overall KPIs versus "Assassin's Creed Origins." Over the past 12 months, Odyssey outperformed its predecessor by approximately 90% for both sell-through and engagement, and by 170% for PRI. This demonstrates another strong acceleration on all metrics since our last update in February.
We are also humbled by the positive reception to the multiple updates brought to "Ghost Recon Breakpoint." We worked with some of our most engaged players for feedback on the Ghost Recon experience, which was pivotal for generating higher positive sentiment from the community and journalists alike. Another demonstration of the depth and strength of our portfolio comes from "Far Cry 5," whose revenues 25 months after release are up almost 40% versus "Far Cry 4," with PRI up almost 10 times. Player re-engagement has also been strong as we've seen the number of returning players rise between February through April. Our portfolio of casual games also had a very strong quarter, notably on Switch. Yves already mentioned "Just Dance 2020," which after a strong Q3, thanks in large part to a very effective TikTok marketing campaign, continued its market growth in Q4.
Just Dance" offers entertainment, social interaction, and exercising options for the whole family. It saw accelerated sales and engagement mid-March due to confinement. "Just Dance 2020" Q4 net bookings were up 156% year-on-year. Our family of Hasbro games also performed very solidly in the context of confinement. "Brawlhalla" continued to break engagement records, which bodes well for its upcoming release on mobile. Over the quarter and the full year, despite challenging year-on-year comparison base, we saw very solid performance at the engagement, back catalog, and PRI levels. During the year, engagement remained stable at very high levels with 100 million active players across our console and PC games. Including "Brawlhalla," our active players base was 117 million. We even managed to grow slightly our MAUs on consoles and PC to 34 million.
The month of March was particularly strong, with record levels for both new and reactivated players, even beyond the high levels we traditionally see in December. Total engagement over the quarter was stable despite the release of The Division 2 in March 2019. Full-year back catalog net bookings reached EUR 1,091 million, down only 5%. This is quite a nice performance considering the very strong comparison base due to Far Cry 5's release in the last few days of fiscal 2018. Back catalog represented 73% of total net booking versus 57% in fiscal 2019, as we had fewer new releases this year. During Q4, back catalog saw a solid year-on-year growth of 8%. As a consequence of this over-representation of back catalog, full-year total digital net bookings represented 82% of our total net bookings versus 69% last year. PRI was definitely stronger than expected.
It was up 5% for the full year at EUR 673 million. In Q4, despite a strong comparison base, PRI was only down 2% to EUR 199 million. It represented 60% of this quarter's EUR 55 million net bookings out-performance. On a platform basis, for the first time ever, PC became our second-biggest platform in terms of active users over 12 months with a strong year-on-year growth. This PRI progress over the past few years reflects the successful transformation of our portfolio, including a significant offering exposition in multiplayer and RPG games. Over the same time period, new player represented more than 40% of our PC net bookings. On all platforms, which saw the biggest growth in active users, the console is reaching a more mainstream audience, which is a clear positive for Just Dance. Download patterns for our Switch games saw meaningful improvement over the quarter.
As expected, mobile revenue was down 14% to EUR 132 million. With confinement, engagement also grew meaningfully, but contrary to our PC and console titles, we did not see a meaningful PRI conversion, even if some titles outperformed, like "Just Dance Now." We expect our mobile business to rebound strongly in fiscal 2021 with the full-year benefit of the Green Panda and Kolibri Games acquisition and the releases of "Brawlhalla," "Roller Champions," and "Tom Clancy's Elite Squad." Let me now go into the details of our full year earnings. First, slide eight of our presentation, our pro forma gross margin was up 1.3 points to 85.1%, despite the impact of provisions on inventories to reflect some prudence on the retailer side. The Switch outperformance during the quarter also weighed on gross margin. Including the new mobile reclassification, gross margin was mostly flat year-on-year.
R&D was down 3% in absolute value and up 9.9 points. I will review the detail in the following slide. Variable marketing expenses were up 2.5 points. It reflects a lower performance on the release side, as well as early spending for the 3 delayed AAA. Additionally, the cancellation of upcoming trade shows resulting in a one-time provision. Fixed structure costs were up 7.1 points. This reflects first the full year impact of the i3D.net acquisition in December 2018, as well as our strategic investment in our direct to player platform. Turning now to slide nine. Total R&D reached EUR 681 million. Despite only one release this year, the limited 13% decrease in total depreciation reflects significant impairment charges on Ghost Recon Breakpoint and accelerated depreciation on upcoming titles as we are factoring in prudent estimates in our fiscal 2021 top line guidance.
I will come back later on to this topic. Royalties at EUR 24 million were higher than anticipated, following the outperformance of Just Dance and the Hasbro titles. Non-capitalized R&D is up 19% and mostly reflects our investment in our live services and future mobile games. It also reflects a one-time accounting event as last year Rainbow Six Siege post-launch was capitalized, and it is now fully expensed. As expected, total cash R&D was up 14% to support our future strong top line growth. As a consequence, the gap between R&D P&L and cash increased to EUR 229 million as we are bringing an impressive lineup in FY 2021, and as we had few new releases in FY 2020. Moving to slide 10, the IFRS, non-IFRS reconciliation shows four types of adjustments. EUR 61 million IFRS 15 deferred revenue, mostly driven by reversals from past launches.
The traditional stock-based compensation charge standing at EUR 54 million as expected and flat versus last year. As a precautionary measure, we have booked a non-current goodwill amortization charge of EUR 101 million. After a very strong performance, two of our past acquisitions have been facing a significant increase in competition, even if they remain profitable. As usual, our non-IFRS figures also exclude the EUR 8 million non-cash charge related to the convertible bond option cost. The non-IFRS net financial charge saw a EUR 9 million increase versus last year. This is mostly explained by the gain of EUR 13 million related to the total return swap settlement that was booked last year. On top of those adjustments, I would like to mention the income tax, which was significant this year despite a low profit.
This was due to the increased BEAT tax in the U.S. that went up significantly in fiscal 2020, without direct correlation with our limited group operating income this year. This discrepancy is due to the fact that the base use for this tax is our growing digital sales in the U.S. Finally, the number of diluted shares is in line with the number of non-diluted shares, as in case of a negative profit, they will have an anti-dilutive impact. Looking at our cash flow statement, slide 11. Free cash flows stood at minus EUR 191 million versus EUR 310 million in fiscal 2019. This EUR 501 million gap reflects mostly the following two impacts: The EUR 471 million decrease of our cash flows from operation due to the EUR 342 million decrease of net income, and the EUR 128 million growing gap between cash and P&L R&D.
An investment in capital assets of EUR 35 million due to investment in servers and studios. Below the free cash flow line, we had EUR 144 million in acquisition related to the purchase of Green Panda and Kolibri Games, as well as deferred payments of strongly performing past acquisitions. We benefited from EUR 382 million of proceeds from the conversion of our 2016 convertible bond and from our employee share plan for EUR 75 million, resulting in EUR 456 million total proceeds. We also received EUR 35 million from disposal of own shares relating to the transfer of our shares under our employee shareholding plan. The issue of our convertible bonds strengthened our equity by EUR 50 million, minus the EUR 7 million interest. We have significantly reduced our non-IFRS net debt to EUR 101 million versus EUR 293 million last year.
As illustrated in the slide 12, we are entering fiscal 2021 with a stronger financial position. We have a solid EUR 1.3 billion equity, and as I just said, a non-IFRS net debt reduced to EUR 101 million. We benefit from EUR 1.3 billion of mostly untapped long-term financing at our disposal to fuel our strong investment plans with no reimbursed maturity happening before January 2023. That's all for my review of our fiscal 2020 performance. Moving now to fiscal 2021. Leveraging our current strong momentum, we believe that we can still achieve our initial EBIT targets of EUR 600 million. This reflects an exceptional lineup as well as higher back catalog digital and PRI than initially anticipated. As a consequence, we have also taken into account an additional buffer, reducing by around 10% the needed unit estimates for our 5 AAAs.
As we said, the COVID-19 crisis has brought external uncertainties over the past few months. As a consequence, we are introducing today a range to our fiscal 2021 targets with net bookings between EUR 2.355 billion and EUR 2.65 billion and non-IFRS operating income between EUR 400 million and EUR 600 million. The top-line range does include EUR 50 million from the new mobile reclassification, which has no impact on traffic. For the sake of prudence, the low end of our guidance with EBIT at EUR 400 million factors in two assumptions. First, we have taken the assumption that one of our 5 AAAs will be moving to fiscal 2022.
This assumption represents more than 50% of the EUR 200 million EBIT range. Even if our current plan continues to include all of them, there is a higher level of uncertainty related to the impact from the transition to work from home.
This impact is up to now limited to few weeks. We need time to evaluate the evolution of our productions over the coming months. Our compass will be the maximization of the long-term value of our games and franchises. Second assumption, the low end of our range also integrates further reduction in the number of units. This reflects additional prudence to factor potential effects from the COVID-19 crisis on our business partners and on consumption. We believe we have factored enough conservatism in the low end of our targets with those two prudent assumptions. Looking at our lineup, four of our five AAAs are now revealed. On top of "Gods & Monsters," "Rainbow Six Quarantine," and "Watch Dogs: Legion," we recently unveiled "Assassin's Creed Valhalla," the next entry in our blockbuster franchise. The reveal was spectacular and set new records in terms of Ubisoft game announcement.
We had over 100 million views of the trailer in the first 10 days, making it the most-viewed trailer in Ubisoft history. Since the reveal, the cumulative views of official and UGC videos is close to an amazing 200 million. AC Valhalla also remained at the top of trending topic lists on Twitter for several days from April 30th in many countries, a first ever for Ubisoft. As a demonstration of the current excitement around the franchise, we also saw a very meaningful spike in players' engagement with Assassin's Creed Odyssey and Origins. As of today, and as announced previously, three of those five titles, including Assassin's Creed, will be released in the fiscal third quarter and two in the fourth.
We can't wait to unveil more, and we will do so progressively throughout the summer, notably at our Ubisoft Forward event on July 12th, as well as at some other exciting upcoming digital events. As mentioned last quarter, we will also deliver other innovative titles, some of them with deep social layers like "Roller Champions." We expect back catalog to be slightly down year-on-year versus our prior comment of down high single digit. Digital and PRI are expected to grow and represent a higher share of total net bookings than in fiscal 2019. We expect gross margin to be up and R&D and SG&A to be in our long-term range of respectively 35%-40% and 25%-30%. On the cost side, in the current context, we are implementing a tight control of our expenses on top of the automatic cost savings implied by the lockdown.
Regarding other items, we expect stock-based compensation of around EUR 55 million and a non-IFRS net financial charge of around EUR 13 million, of which EUR 3 million is coming from the IFRS 16 impact on lease accounting. The USD tax is having quite an impact, so we are guiding for between 30%-35%, which we believe is prudent. Number of diluted shares is expected around 125 million. The R&D P&L and cash gap will be higher than EUR 100 million. Long-term opportunities for material value creation are even stronger than before, and we continue to invest meaningfully in them. Of course, given the current macroeconomic context, if the level of activity was lower than expected, we would adjust our investment plans accordingly. We expect to generate a solid cash flow from operations in fiscal 2021.
With a negative impact from working capital due to the releases of two AAAs in the last quarter, free cash flow should be negative. Regarding Q1, we forecast EUR 335 million in net booking, which includes an estimated EUR 11 million impact on the mobile reclassification. On a comparable basis, we expect Q1 to be slightly up despite the fact last year had benefited from the release of Anno 1800 and from the Division 2's recent launch. This highlights our current excellent momentum with positive trends that are continuing well into April and early May. We are also benefiting from last year's two acquisitions. Finally, before handing back the call with Yves, I would like to mention that leveraging our learnings with the reopening of our Chinese studios, we are implementing a gradual return of our teams to our studios and offices.
We will have also to adapt to the different restriction lifts across geographies while preparing ourselves to possible new waves of confinement. The health of our teams and their families is our top priority. I now hand over the call back to Yves.
Thank you, Frédérick. Over the long term, this crisis will have a profound impact on the world and our industry. While it is too early to draw definitive conclusions, it is clear gaming has structurally expanded its audiences. More people are engaging with video games than they have ever been. More of them are discovering the benefits of online platforms and of the social benefits of modern gaming, and the install base of hardware has been growing. There is also a more widespread acknowledgment of the benefits games can have on people's lives. The video game industry is blessed to show a strong resilience in the current crisis, and the current trends should be very supportive over the long term. The past quarter has shown how strong and deep our portfolio of franchises and our live operations are.
This is providing us with very strong support for the year, on top of the most ambitious lineup of the industry. Comforted by the recent and very promising reveal of "Assassin's Creed Valhalla," we also have to continue to adapt to the challenges presented by the COVID crisis, and our teams are working hard to deliver strong productivity across the board. The global uncertainties that surround us require agility, entrepreneurial spirit, but also a certain level of insight. What matters to us as founders, managers, and key shareholders is to remain in control of our trajectory and of the maximization of our franchises' value for the benefits of players. Ubisoft has created major value for its communities of players, employees, partners, and shareholders over the years.
We intend to continue doing so by focusing on creating amazing content, by building our direct relation with our players, and by delivering strong engagement and player recurring investment growth. Finally, we are super excited by the arrival of the next generation of consoles, which will bring a new wave of excitement and momentum to the industry. We are now ready to take your questions.
Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please press star followed by the digit one. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will take our first question from Robert Berg with Berenberg.
Yeah. Hi, hope everyone is well. Couple of questions from me, actually. On the three delayed games, it's now been a few months since we last heard from you. Could you run through any update on your learnings, the types of things you've changed in these games? Has this been in line with what you thought a few months ago, or is there anything more that you think needed to be changed? Then, I guess, a question on the guidance. I'd like to know why in your top end, kind of the no real COVID impact end of the guidance, you have chosen to take that 10% haircut to unit sales. Is there any particular reason behind this, or is it just prudence? Why now you're giving a range, are you reluctant to raise the top end of that range?
I suppose a follow-up on that point, let's say you were being prudent, and maybe you decided not to be prudent and reiterated the same unit assumptions. Could you give us a sense of the EBIT that you would have forecast for us, or at least how we could think about the underlying positive trends that you're seeing and the impact that would have on FY 2021? Thank you.
Thank you for your questions. Additional time is always a good benefit for games, and we have been putting lots of energy and passion on those three games so that they can really come with something new for the industry and also help us to bring new brands to the company. We are really using that extra time to improve and create games and brands that can live for a long time in our portfolio. On the 10%, Frédérick can give you more insight.
Yes, Robert. Hi. This is to give you some visibility on the extra buffer that the extra back catalog that is higher than expected is giving us on the new releases side. We're very happy today and relying on what Yves just mentioned with the progress and the visibility we have on the new releases. We've really taken the extra time on the three postponed games as well as on the two other franchises to come with strong quality, a strong element of differentiation, and we are even more comforted on the potential for marketability. I think the Assassin's Creed Valhalla recent reveal is another strong, compelling testimony of that. It's really to give you visibility on the extra buffer that the structural higher catalog that we've benefited from is giving us.
If we had kept the same level of quantities or in other words, what is the level of extra profit that potentially the higher catalog than expected is giving us? We had previously guided on the high single-digit decrease on catalog on a lower base, as guided in last February. Today we're talking about a slight decrease on the catalog on a significantly higher base. You can consider that translates into nearly EUR 100 million extra potential contribution.
Contribution at the EBIT level or the revenues level?
On the gross margin level.
The gross margin.
That we're talking here. Yeah. From the catalog.
Okay. That's great. Thank you very much.
Thank you.
Next we'll move to Omar Sheikh with Morgan Stanley.
Good evening, everyone. Just three questions for me, if I may. The first is on the guidance. I wonder whether you could maybe just dig in a little bit on the two assumptions that you made for the bottom end of the range. In particular, could you just maybe talk about some of the actions you might be taking to mitigate the impact on production? You mentioned motion capture and localization and so on. Perhaps you could just kind of give us some color on what you're doing to offset or mitigate that headwind. Then on the consumer environment, could you just maybe talk through a little bit how you're currently expecting the consumer environment to be come October, November, when you'll have these releases coming out? That's the first question. Second, on Tencent. It's been a couple of years since the Tencent agreement was signed.
I wonder if you could just give us some color on where we are today, how you're thinking about the development of games that they might be working on, and in particular, whether you think there might be some chance that there'll be a game launched during fiscal 2021. Finally, on past calls, you've talked about your confidence that 2022 will grow over 2021. I know we've got a lot to get through before we get there. Do you still have that same confidence? Thank you.
On Tencent, I can give you some color. First, we are still waiting for approval on a certain number of titles, including Rainbow Six. We are dependent on the speed of the approval process there. On the other games that Tencent is developing, they are working on a few titles and they are progressing well. We expect those will have an impact, not this year, but next year.
Your first question was on mitigation on the headwinds?
Yes.
Two assumptions.
On production.
Yes, on production. What we've done since the move to work from home is that we have addressed a few areas of challenges, such as testing, motion captures, video recording, and localization. We have defined a clear priority list so that all the intervention we made at group level will serve our biggest games coming in fiscal 2021 and fiscal 2022, as well as our biggest games that are supposed to deliver strong live content in the fiscal to make sure these projects are really first served in the group. What we see today that we're on the right path. Productivity is progressing well.
As we said previously, of course, we need to wait more months to see whether we are capable to deliver and sustain a high productivity over time, knowing that we have, as we said earlier, a very big and impressive lineup and content to serve in fiscal 2021. Your question was on fiscal 2022 as well?
Whether you might grow in 2022.
On fiscal 2022, we continue to see growth potential relative to fiscal 2021. As I've just said, we are protecting our biggest projects that need to deliver in fiscal 2022 as well. So far so good. Of course, in the light of the external uncertainties we've just referred to, we stay vigilant on the impact it can have on fiscal 2022, of course.
Okay, thanks very much.
You're welcome.
Next we'll move to Nicolas Langla with Exane BNP.
Yes. Hello. Good afternoon, everyone. I've got three question, please. The first one, you mentioned the boost in March and April supported by the lockdown measures. Is this boost mostly related to existing players spending more on your games, or you have seen a lot of new players entering your game? For those new players, did you implement any specific initiatives to try to retain them? Second question, when you build your guidance for full year 2021, how did you model the player engagement post the lockdown era? Did you basically assume a normalization of the trend mid-May as many lockdown measures are lifted, or you have retained some benefits in the coming quarters? Finally, on Rainbow Six Siege, what feedback can you share regarding the Rainbow Six Around The World Battle Pass, which was released end of March?
Have you seen any material improvement in player engagement and monetization or came out at both the battle pass? Do you plan other battle pass for Rainbow Six in the coming quarters? Thank you.
Thank you for your questions. On the revenue for the end of the quarter and the beginning of this year's first quarter, what we can say is it's a mix between new players that are coming, especially on casual. A lot more people are coming on Just Dance, Monopoly, UNO, and other casual games that we have. Many of our family games are played, and those are new players. On the high-end, the fact that Valhalla did very well is bringing also lots of people on Assassin's Creed, some that played before and some that are new to the franchise, but in a lesser extent than on casual. It's a mix between the two. On the battle pass now of Rainbow Six, the battle pass is doing very well. It's a good new addition to the franchise and a new way to play the game.
It has a good momentum, and it's doing well for the franchise. On the other question, maybe Frédérick?
Yes. Hi, Nicolas. On the PRI, the way we model it related to lockdown impact. Actually, in terms of the lockdown impact, we factored in an impact on the first quarter and not beyond the end of June. Of course, it benefits PRI for the first quarter, but in our assumptions, we have not factored in an extra boost beyond end of June.
We are also neutral on after the confinement. We consider that it will be as it was before, even if in China it's a bit higher.
Okay. Perfect. Thanks a lot.
Thank you.
Next, we'll hear from Ryan Gee with Bank of America.
Hey, good evening, guys. Thanks for taking the question. Back to the guidance. I don't want to put words in your mouth, but it's just important to clarify why we're even talking about EUR 2.35 billion in bookings at the low end. Can you clarify for us, are you actually tracking at this point towards your original outlook that you provided in February, but just acknowledging that if trends change and if you decide to delay a game, then this is what the downside is, not that you're actually tracking anywhere near that at this point? That's the first question.
In terms of the three titles that were pushed out from last year, Gods & Monsters, Quarantine, Watch Dogs, since those were originally planned for last year, are they actually finished at this point and you're just getting some final polish, so there's no real risk of those titles being delayed, and it's more likely the one unannounced title that could see the delay? I have a quick follow-up.
Yes. On your first question, yes, we do confirm today that we are tracking against our original guidance. For the first, the very reason I mentioned, which is we benefit from structurally stronger catalog dynamics, even before we saw the confinement started. Of course, recognizing that we factor in the positive impact from the confinement in the first quarter. Assuming that this catalog dynamics will maintain throughout the year, we are entering into this fiscal with some more comfort. Also we've been very happy with the spectacular review from Assassin's Creed Valhalla. Now, of course, like Yves said, and I repeated that after him, we need to take into account that there are major external factors that can have an impact both on the production development, knowing that we have a massive content to deliver this year that is going along very well.
That's a factor of prudence that we need to take as we're going to be tracking our production process in the next months. Also taking into account that there is some lack of visibility on the potential COVID-19 crisis impact on consumption and on our business partners. In terms of the titles that were planned for last year, as we said, we've taken the benefit of the extra time to really stress on what we mentioned that will be our focus areas, coming with an impeccable player experience at launch, making sure that quality is really good, that the differentiation element will allow this game to stand out, and to work on the marketability and the potential in terms of increased audience. We're happy to see the progress of the teams currently, and they are working intensely through this polish period.
They are also taking the benefit to bring more value for the players, and that's a great benefit of this additional time.
Okay, just a quick follow-up was, Assassin's, Quarantine, and Watch Dogs, those are kind of sequels from prior games, more or less. Do you expect those three to grow versus the last version in terms of unit sales for fiscal 2021? PRI in year one for those, should those be up, down, flat? What are your thinkings there? Thank you.
First, "Quarantine" is a new game. It's not the same as "Siege." It's a completely new experience that we are bringing. Even if we had some of that came in "Siege" at one point, it's a completely new development. On "Assassin's Creed," we expect the game will do very well, our assumptions are still present. Yes.
Were you done with your question, Mr.?
Thank you.
Thank you. Next, I'll move to Ken Rumph with Jefferies.
Hello, gentlemen. Three questions, if I may. Firstly, any comment on Uplay uptake? I know I can put myself in that column. I guess a lot of other people have taken advantage. Secondly, I know it's looking forward a bit. Your kind of model for the average year was three or four AAA games. If a game was delayed into 2022, should we assume that is therefore a four-game year, or is there a possibility that it becomes a five-game year? Related to that, how is the production of those games that are further out? Skull and Bones that we know about, and a number of others that are kind of long in development, do you feel that work from home, that they're so far from being finished that it won't have an impact on those, or is that a factor?
Finally, the goodwill write-down, the main sources of goodwill on the balance sheet are a couple of mobile businesses that you bought in 2018 and 2017. You mentioned a precautionary goodwill write-down because of a more competitive environment. Is that what I should assume it is? I can't see why it would be i3D, for instance, so it seems more likely to be one of those earlier mobile businesses that you bought. Thanks.
Thank you. Yes, on those companies, yes, it's more mobile companies that we bought in the past, and they are on some businesses that are very competitive at that time, but they are still profitable. On the other topics. Yes, on Uplay, we've been very happy with the strategic move that we accelerated this year in focusing more on Uplay, and that has paid off greatly. We've seen a strong momentum on Uplay over fiscal 2020, and that's why we mentioned earlier in the call that it's now accounting for more than 40% of our PC net bookings. PC, that has been very dynamic for us this year. This is really definitely a good strategic move. A lot of those sales are done directly on Uplay, so it's a big plus also in gross margin.
On your question of fiscal 2022, we guide it for three to four AAA games. That's our normal pattern. It's still too early today to give more visibility on this. As we said a couple of times earlier in the call, we are carefully monitoring the good progress of our production. So far, as we have prioritized our big projects for fiscal 2021 and fiscal 2022, we can say that this project has been impacted the same way as fiscal 2021. We lost a few weeks of productivity. So far so good, and the impact is still manageable. We'll continue tracking that in a vigilant manner in the coming months as well.
Thank you. May I ask a quick follow-up? Some companies may not be finding life easy in the current environment, particularly if they don't have kind of back catalog or live games. Do you feel that the likelihood of M&A has increased, particularly perhaps once we get beyond the immediate kind of difficulties of arranging things that we have currently?
We are studying carefully the market those days.
If there are opportunities, we will take them. At the same time, we have also to tackle these new challenges, so it's taking a little bit of our time at the same time.
Okay. Thank you very much.
For sure we'll look at it carefully.
Next, we'll move to Tom Singlehurst with Citi.
Good evening. Thanks for taking the question. Tom here from Citi. Just a couple, actually. I was just wondering whether you could talk about engagement on some of the cloud-based services, in particular Google Stadia, and whether there are any numbers you can share on Uplay+ on the subscription side. Second question is on free cash flow. I think you said you expect free cash flow to be negative in 2021. Just wondering whether you could break out the different parts of that. I presume that's because, as you said, the launches are coming quite late in the year, so there'll be a working capital outflow. I may have missed it in the presentation, can you specify the anticipated level of cash spend on R&D for 2021 as well? Thank you.
Yes, on cloud, things are moving. There are more and more actors looking at this potential business. We have more and more games now available on Stadia, which are doing well. We are also using a lot of Stadia possibilities to actually do development, because it gives a chance for work from home people to actually review some of their games. It's something interesting. Cloud is coming, it's coming at normal speed, I would say. It's getting better and better, and we think at the end of the year you will see some evolution on the number of players and also on the brands that will be launched there. It's a good long-term trend that will change the industry, we think.
Yeah. On your question on the cash. Yes, we mentioned that in fiscal 2021 we will rely on a solid cash flow from operations. Because we will have two big games, AAA games in Q4 this year comparing with no big AAA game in fiscal 2020, in the last part of the year, it will have a significant working capital effect. That's the key element to have into account, again, relying on the solid cash flow from operations. In terms of cash R&D, as we said, we continue to invest strongly as we see the medium to longer term opportunities to be immense, actually bigger than ever before. We continue focusing on investing at a good pace.
Of course, in the context of what we said, we will track carefully the level of activity and consumption over time, and so that we regularly adapt our investment plan accordingly.
Perfect. You're not going to give us a number for cash R&D spend?
We had guided on a 15% growth year-over-year on average, comparing with fiscal 2019 as a reference base. It was 14% this year. We continue to get a double-digit growth rate in investment.
That's very clear. Thank you so much.
Thank you.
Next I'll move to Matthew Walker with Credit Suisse.
Hi, thank you and good evening. The first question is: do you feel like you have solved the issues around consumer testing that led to Breakpoint? How happy are you with your testing process now? The second question is on the EBIT guidance for the downside case. You said over 50% is potentially for the delay of one title. It used to be that one title in a million units was roughly EUR 35 million of EBIT, which would actually be much more than EUR 100 million or so. Maybe you could explain what you're assuming for each million units delayed. The third question is do you feel like now that you've got those three games that you had last year, that those are just in polish phase? It feels like Valhalla, you are ready to go with that on the timeframe that you suggested.
Would you say that the risk of delaying more than one title is extremely low now for this year?
Yes, we can say that delaying more than one title is extremely low. What we can say, though, about the revenue of one product is EUR 35, is more the turnover than a game can generate per million. For EUR 35 million per million. You have development costs, marketing, and so on. The profitability is dependent more on how many units you achieve over a certain threshold.
What we said earlier is that, in our assumption, to help you model what is behind our assumption, the impact of a delayed game would be more than 50% of this EUR 200 million range.
On the consumer testing point? Yeah.
Yeah. On consumer testing, as I just mentioned, we had to use other systems, and that's why I was mentioning Stadia as a way to test with consumers as well, some specific consumers for play tests, and also in-house tests. It's still challenging, especially during the time when most of us are in confinement. It's working, and what we see is that we have first reopened in China, and we are reopening in many countries, including Germany, including Sweden. We have the ability to do a lot more testing, but it's something that was more complex in the last couple of months.
Okay. Thank you very much. Thank you.
You're welcome.
Next, I'll move to Mike Hickey with Benchmark Company.
Good evening, gentlemen. Thanks for taking my questions. Appreciate it. I guess at a high level here, if you assume your one game delayed gets you to four AAA games, you are still sort of EUR 350 million above your performance in sales of fiscal year 2019. The low end of your profitability guidance is EUR 46 million below fiscal year 2019. Can you speak to the disconnect in profitability between those two years, in particular when you think live service growth is higher? I am guessing your catalog, which is high margin, is also higher than fiscal year 2019. I have a follow-up.
One thing to consider is when we delay products, we really also spend more time to grow them so that they have a bigger potential. That's taking some resources and cash that we expect will be in the benefit of the long term of those brands. That's one thing. Maybe Frédérick can give more color.
The other point is that we're talking here about five AAA games as opposed to three at the time. We expect, of course, that on the long term, five AAA games will drive a very high level of profitability. But for the year of launch, of course, you have five marketing campaigns and five R&D budget. That also on a per game basis will take more relative to the overall net booking.
Don't you guys pick up some marketing benefit given that you're launching these games with next-gen consoles?
As we said, we took some assumption to be prudent in terms of consumption in our guidance.
There's also one thing to consider, is that Ghost Recon Breakpoint was very negative in fiscal year 2020 because we had a good marketing budget on that game, and it didn't achieve what we expected. It's getting better now with the community as what we introduced with the new modes is helping players to have a far better experience, especially closer to what they expected. It has been a loss leader in financial year 2020.
Okay. Last question from me. A few weeks of productivity loss doesn't seem huge, I guess, given where we are in the end of your fiscal year. It looks like just one game is really at risk here. Can you please just sort of weight the probability that you think there is a delay, or just how conservative you're being here? Thank you.
What is important to consider is that we have five games. A few weeks on one can have an impact on the others. We are being prudent, for sure, but we don't know what will the next few months will bring. That's why we are taking potential further delay due to the situation, even if our teams are really working hard to make sure they tackle all the problematics for mocap, testing, and all the other potential issues we had.
Thanks, guys. Thanks a lot.
We are conservative. We don't see any specific issue on a specific game. As Yves said, we are taking a general cautious stance there.
Thank you.
Mr. Hickey, was that the end of your question?
Yes. Thanks, guys. Appreciate it.
Thank you. That will conclude today's question and answer session. I would like to turn the call back over to the speakers for any additional or closing remarks.
Thank you very much for all your questions, and we'll keep you posted on the evolution. Thank you very much.
That will conclude today's call. We thank you for your participation.