Good afternoon and good morning, everybody. Thank you for joining our conference call. We started the year on the right foot. Our games performed solidly and players' recurring investment grew strongly. Notably, "Assassin's Creed Odyssey's" performance was outstanding, with quite impressive engagement, PRI, and sell-through nine months after its release. The Quebec City team has delivered handsomely, and we can't wait to share more about their next game, "Gods and Monsters." The quarter also saw a better performance than anticipated for "Rainbow Six Siege." Three and a half years after its release, "Siege" continues to be one of the strongest games on the market. Not only is it one of the top 10 biggest sellers of the past five years, it also possesses a rare pedigree.
It is a game with an extremely strong core gameplay loop, amazing engagement and retention, great esport momentum, and has a true global appeal, reaching a wide audience in Europe, North America, and Asia. Only a handful of games in the industry combine those qualities. In a very competitive market for shooters, "Siege" team continues to perform steadily and is already seeing the benefits from the revamped production organization they initiated 18 months ago. Our E3 performance was another key highlight of the quarter. Most importantly, the "Watch Dogs" brand is again top of mind for gamers, thanks to its breakthrough gameplay innovation. "Ghost Recon Breakpoint's" gameplay demo also had a very solid showing. It achieved robust viewership with impactful content creators video and the best sentiment score of any E3 game. Our full-year targets are supported by those positive trends.
I will present our E3 performance in more details, but first, Frederick will review our Q1 highlights. Frederick?
Thank you, Yves, and hello, everybody. Our net bookings reached EUR 314 million in Q1, down 18% year-on-year and above our target of approximately EUR 270 million. As a reminder, the year-on-year decrease is due to the absence of a big release during the quarter and to last year's back catalog benefiting from "Far Cry 5" strong contribution after releasing just five days before the end of March. As Yves mentioned, we achieved this better-than-anticipated quarter thanks to a broad-based performance from our games and PRI. While MAUs for our PC and console games were flat year-on-year, engagement per player increased and reached record levels. On the new release side, as we said mid-May, "Anno" achieved a record launch, including meaningful progression in player engagement. Our back catalog, down 18% to EUR 273 million, ended up better than expected.
While "Rainbow Six Siege" and "Assassin's Creed Odyssey" were key highlights, we also saw a nice contribution from "For Honor," "Ghost Recon Wildlands," and "The Crew 2." "Assassin's Creed Odyssey's" solid momentum continued over the quarter. This was spurred by very strong growth in engagement. Over the quarter, we released the first two episodes of The Fate of Atlantis story arc. We also launched Story Creator Mode, a brand-new feature allowing players to write their own stories. All these events and content updates originated last year. We released yesterday "Judgment of Atlantis," the final episode of The Fate of Atlantis story arc. "Rainbow Six Siege" was the other highlight of the quarter, benefiting from an increased frequency of updates, including weekly content drops and cool new creations.
The April Rainbow is Magic event, the new season Phantom Sight in June, and a successful esport event in Milan generated very solid engagement and PRI. While April was challenging, June was remarkable, and in terms of MAU, finished as our biggest month ever. Over the quarter overall, engagement and PRI grew year-on-year. We also signed a partnership with Neowiz to distribute "Rainbow Six Siege" in South Korea PC bangs. PC bangs are a big segment in Korea, and Neowiz is one of the leaders. Starting this summer, this will allow "Siege" to reach a wider audience in this key market for competitive shooters. Continuing on these positive trends, in early July, we released a new event, Showdown, that had another positive impact on engagement and PRI.
With "The Division 2," we have delivered a great game with record Ubisoft net promoter scores and engagement per player, and a growing PRI versus "The Division 1" and "Far Cry 5." "The Division 2" is the best-selling game worldwide for the first six months of the year. For the future, we plan to drive acquisition and engagements with significant post-launch release plan, including three major content updates available for free to all players, with additional narratives and missions, new PVE mode, and new specializations. Episode One, DC Outskirts: Expeditions, will start releasing on July 23rd. This major content update will include two new main missions, two classified assignments, a new discovery difficulty setting for the raid, and the most demanded adjustments based on our community feedback.
We expect it will have a nice boost to global activity and acquisition. Alongside this solid back catalog performance, PRI was very strong, up 19% to EUR 150 million. This is even more impressive considering mobile revenue was down 24%, due to no release this quarter versus the launch of Might & Magic: Elemental Guardians last year. This means non-mobile PRI had a very robust 32% growth year-on-year. While deferred revenues had some positive impact, most of the growth was generated during the quarter. Total digital net bookings reached EUR 292 million, up 2%. On a platform basis, PC represented 34% of our total revenues, versus 24% last year, driven by the success of Anno 1800, which performed very strongly on Uplay. Uplay continues its strong momentum. As announced during E3, we will launch in September Uplay+ for PC, a new subscription platform.
It will also be available on Stadia in 2020. Uplay+ will allow us to strengthen the direct relationship we have with players by leveraging the breadth of our portfolio, which is one of the most diversified in the industry. To conclude on Q1, I would like to mention that according to Glassdoor's annual rankings, which are based on employees' ratings, Yves was ranked third on the list of the best CEO in Canada for 2019. Having such strong employee support for our management is extremely valuable. Talents are at the core of Ubisoft's capacity to create amazing games and strong shareholders' value. Looking at Q2, we expect net bookings at around EUR 310 million, down 15% versus last year. This reflects fewer early physical shipments for Ghost Recon Breakpoint versus Assassin's Creed Odyssey last year, in line with the continued digital transformation of the industry.
To a lesser extent, it also reflects the late release of The Crew 2 in June 2018, which had a positive impact on Q2. As for the full year, we confirmed our targets with net bookings expected around EUR 2.185 billion, up 8%, and non-IFRS operating income at around EUR 480 million, up also 8%. Our current back catalog and PRI trends, as well as the performance of our games at E3, are robust support for achieving those targets. I now hand over the call back to Yves.
Thank you, Frederick. Ubisoft had a successful E3, especially on social media. Ghost Recon Breakpoint benefited from excellent visibility among content creators and record-like ratios among players. The team's focus on a strong hands-on gameplay session delivered very well, as four of the six most-viewed content creator videos were for Ghost Recon Breakpoint. It also reached the best sentiment score in the industry with only 2% dislike ratio. Ghost Recon Breakpoint is seen as a clear step forward for the Ghost Recon franchise, and the demo cemented this perception. The breadth of new survival features has been praised for its contribution to the tactical depth of the game. Media, players, and influencers also reacted positively to the game's stronger narrative and also Jon Bernthal's presence, whose character is a charismatic antagonist to remember.
Ghost Recon Breakpoint targets the military shooter segment, the biggest of all premium shooter segments, and will benefit from a great release window on October 4th. Watch Dogs Legion was a huge success also at E3. Media and content creators who had the opportunity to try the hands-on demo praised the never-seen-before groundbreaking Play as Anyone innovation. It enables players to recruit and play as any character from the world. The reinvention of an open world near-future London on the brink of collapse was also highly praised. With such a strong reveal, we have reignited the Watch Dogs franchise. Legion garnered more than 65 awards and nominations, including Best of Show by outlets like GameSpot, PC Gamer, and GamesRadar+. Best Action Game by IGN and Game Informer, and Best Action Adventure Game by the official E3 game critics. Watch Dogs Legion will be released on March 6, 2020.
We also unveiled the first details of Gods & Monsters and Rainbow Six Quarantine. Gods & Monsters is a new IP developed by Ubisoft Quebec. It stems from the research and stories from ancient Greek mythology they studied when creating Assassin's Creed Odyssey. Gods & Monsters puts players on a quest to save the Greek gods in a vibrantly colorful open world filled with mythological monsters. The game will be released on February 25th. Rainbow Six Quarantine is leveraging the proven gameplay of the critically acclaimed Rainbow Six Siege Outbreak. Quarantine is a full-fledged PVE co-op experience complementary to Rainbow Six Siege PVP. It will be launched in the fiscal fourth quarter. Both games generated great interest at E3, and we can't wait to show you more. We also revealed Roller Champions, a new free-to-play PVP action sport game developed by Ubisoft Montreal.
It had the strongest performance of any E3 games in terms of streaming viewing time. An amazing performance highlighting its fun and innovative competitive gameplay. Roller Champions will be released in early 2020. As a conclusion, our games performed better than anticipated during the quarter with strong engagement and player recurring investment. We also saw a robust performance from our games at E3, which gives us confidence for the remainder of the year. With many growth drivers at our disposal, we are ideally positioned to generate strong revenue growth and further increase our profitability over the coming years. We are now ready to take all your questions.
Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will take our first question from Robert Berg of Berenberg. Please go ahead.
Hi. Hi, guys. Three questions from me, if I can. The first, as you said, really good June, start of July for Rainbow Six in terms of player count, PRI. You also mentioned more content too with the weekly drops. Clearly budgeted for the cost of the content in your guidance, the revenues ahead. I'm not worried about the full year guidance, but how should we be thinking about the relationship, the extra cost versus the extra revenue for these additional content drops? What have you seen so far? What returns are you seeing there? That would be interesting. The second question on the competitive environment heading into your Q2. A bit of a follow-on from my previous question, I guess. There's no obvious impact that I've seen from your games from recent updates from one of your peers.
How are you seeing the competitive environment, in July, I guess? Press reports of a deal with Facebook for VR. I know that VR has been pretty minimal so far. Could this be interesting? How should we be thinking about the VR opportunity for you guys? Thanks.
Thank you, Robert. Yes, on your first question, what we've seen is that we started to see the benefit of the reorganization that the Rainbow Six Siege team did in terms of reorganizing their production pipelines to be more agile and efficient. That's been very effective. What we see is that we are coming from a situation where they were used to releasing big major updates every three months, and they continue to do so, but on top of that, they're coming by fun events every six weeks, being more creative. We also come with smaller content drops every week. All of this shows the agility of the team. Because they've been working on improving on the engine adaptability as well, it's been pretty efficient. That's how we see the evolution of the Rainbow Six team, and that's also pretty inspiring for other teams.
Now for the July month, the competitive environment is strong, but we are happy with how our games are succeeding. We don't see a big pressure from the competition at the moment.
What we've seen is that June for Rainbow in particular was a record month in terms of MAUs, and then just at the very beginning of July, we came with Showdown, and it had a strong positive response from players. It helped building on the momentum of June, July has started off to a good start so far.
On the VR side, we think that seamless, frictionless, and good entry prices, and good games could help this business to take off, because it provides a good immersion for players. We need to make sure those elements are there to make it actually grow.
Okay. That's great. Thank you, guys.
Thank you.
We will now take our next question from Nicolas Langlet of Exane BNP Paribas. Please go ahead.
Hello. Good afternoon, everyone. Two question from me. The first one on The Division 2. How is the game trending versus The Division 1? Notably, are you happy with the monetization level? Second question on the midterm net booking growth. Given your view on the industry growth potential, the increase in cash on this spending, your plans for the coming years, and what you have in your pipeline, do you think you can maintain a double-digit net booking growth in the coming years? Do you think it's feasible? Thanks.
From Division 2. Division 2 did in line with our target in Q1. Today, we rely on a strong core audience. With a record level of engagement per player, so higher than Division 1 actually. As we said, PRI is up relative to Division 1. What is important for now is that we're coming with a massive post-launch program that is meant to further drive acquisition and to nourish the end game, to activate players that were eager to get more content. That's the whole idea behind this personal program that will be available for all players. That's why we believe that Division 2 will be a strong performer in FY 2020.
We have the first episode coming the 24th of July, so in a week.
In terms of midterm net booking growth, yes, we expect a strong growth on the top line. It means that it will be a double-digit growth over the next years, that will come with improvement in our operating margin.
Okay.
Just to complete our answer on The Division 2, the post-launch program will be a bigger one that what we used to have on The Division 1 at the time.
Okay. Thank you.
You're welcome.
We will now take our next question from Michael Ng of Goldman Sachs. Please go ahead.
Great. Thank you very much for the question. Could you talk a little bit about your expectations for PRI pacing throughout the rest of the year in fiscal 2020? Should we expect this nearly 20% year-over-year growth that you realized this quarter to continue throughout the year? What are some of the key PRI drivers for the rest of fiscal 2020 that we should be aware of? Thank you very much.
For the year, we expect solid growth on PRI, which means that we expect actually a strong growth on the PC and console side. Keeping in mind that we assume that mobile will be lower than last year, as we have a lower impact from new releases on mobile than last year. I'm not going to tell you that we've confirmed the same percentage over the remainder of the year. The fact that Rainbow and Division and Assassin's Creed Odyssey, on top of the rest of the catalog, doing very well on PRI, over this first quarter, it bodes well for the rest of the year.
On top, we had a good Ghost Recon Wildlands PRI, the new Ghost Recon Breakpoint will also be on the same vein.
For Honor also did well and The Crew 2.
One follow-up, if I could. My understanding is Rainbow Six Siege is largely a PVP game, but there have been some PVE events like Outbreak. How many Rainbow Six Siege players play those PVE events like Outbreak? I'm just trying to understand what that experience taught you about the potential demand for Rainbow Six Quarantine. Thank you very much.
There's a huge demand from Rainbow Six players to have PVE. This event was really the biggest event on Rainbow Six when it was launched in March last year. We think there are really a good percentage of the players that will come to this, plus players that didn't want to play PVP that will be coming back to the brand via the PVE. That's what we can say. We can't give you numbers, but we are very optimistic on the fact that it can be a good driver for either people that love the brand and who didn't want to play PVP and the people that play PVP, actually.
Great. Thank you very much.
We are very happy to come with a complimentary type of gameplay on the franchise. We believe that with a more accessible gameplay, that will also bring new players into the franchise.
Thank you, Frederick.
Thank you, Mike.
We will now take our next question from Charles Scott of Kepler. Please go ahead.
Yes, hello, good evening. Three questions, please. The first one on Rainbow Six Siege. It seems that the game has benefited from the collapse of Apex in Q1. Did you see any impact from the release of the season 2 of Apex Legends on July the 2nd? Second question, still on Rainbow Six Siege. Can you update us on the approval process of the game in China? My last question is on the audience. I'm not sure that I have well understood what you said during the call. MAU were flat in Q1, right?
Yes. MAU overall, you mean, we are flat in Q1, but the engagement per player has been increasing and actually achieve record levels for the quarter, for the group.
For China, we can't share more news on that. It follows the normal process, I would say.
On the impact of competition, I will say that what we've seen in early July, as I said before, the release of Showdown drew very positive reaction on our side in terms of activity and in terms of engagement and PRI. So far so good for Rainbow relative to the competitive landscape. Having said so, we stick to what we said back in May for the full fiscal year guidance for Rainbow, meaning that we have factored in a potentially strong competition landscape for the full year. We'll have to look at how things evolve. So far, so good.
Okay. Thank you.
We will now take our next question from Ray Stochel of Consumer Edge Research. Please go ahead.
Great. Thanks for taking my question. Can you all talk broadly about net promoter score trends across your titles, anything that's particularly standing out? If possible, compare that either versus peers on either net promoter score or a similar sentiment metric, and whether or not you guys have seen improvement in any of your titles over the last several years. Thanks.
Yes, that's one major point that we've seen over the last years, which is a continuously improvement of the consumer sentiment. Because we've been continuously investing in the post-launch program of all our live games. Even when we had to face some difficulties some years ago on some of our games, we showed strong commitment, and we've seen a stronger progression of sentiment across all the portfolio, due to also the fact that we focus on delivering high quality on the launch of the games, as well as then in delivering constantly post-launch content of quality across the portfolio. We've also had to do strong work on everything that was related to infrastructure, server, player experience. That has been a learning curve over the years, but that's driving a lot of good feedback that we follow on a weekly basis.
We haven't seen everything yet because i3D.net, we are starting to use more and more of their infrastructure, and this is going to help us a lot, to improve the ping of all our players. We will continue to improve the service over time.
As well as protecting our servers from any security elements. That's very positive for us in the long term.
i3D.net is the last acquisition we just did, in fact. Back in December.
Great. Thanks so much for taking my question.
Thank you.
You're welcome.
We will now take our next question from Ken Rumph of Jefferies. Please go ahead.
Hi, gentlemen. Thanks. Three questions. Firstly, briefly on PC, was all of the percentage increase Anno, or is there an underlying increase in adoption of PC for you? The second question, you had a sale event in July, that's common with Steam and some other platforms. I wasn't sure whether it was a new thing for you seasonally to do that, and whether that is something that we should be aware of from a revenue point of view. Finally, Uplay+ launching mid-September, I think, initially free. I'm just wondering, will that therefore affect revenues? Will it affect deferred income? In fact, if it's free to begin with, will it even not affect revenues until later? Just wondering how the kind of revenue recognition will work on Uplay+. Thanks.
Yeah. The 34% was also pushed by Anno, which is a PC-specific game. Even with that launch, we had a very good performance on PC overall. Now on the Uplay+, it's coming along well. We don't expect the free months of September to have a mega impact on our back catalog, because it's only one month for the people that will not pay afterwards. It will certainly make lots of people discover our games. Then after, they will decide if they jump in and pay the first month, in fact.
On the sale event in July, yeah, we've had some promotion, but that's pretty common and usual, which we do on a different platform. That's the beauty of the digital flexibility that it offers us regularly.
Nothing
nothing particular on this very event.
Okay, thanks very much.
Thank you.
We will now take our next question from Nick Dempsey of Barclays. Please go ahead.
Yeah, I've got two questions, [inaudible] Just picking up on what you said earlier about good PRI for Wildlands and the impact on Breakpoint. Does your recent experience with Wildlands therefore make you more optimistic than you were at the start of the fiscal year when you set your guidance about the PRI contribution for Breakpoint this year? Secondly, just about guidance for the year. You started off the year, I guess, worrying whether Cyberpunk would land in the middle of your Q4, your big launch quarter. You've now had a Q1, which is comfortably better than you were expecting. Can we glean from that you feel more comfortable about your guidance than you did when you set it?
On the PRI side, The good start from Wildlands in the first quarter is, of course, good news. It doesn't anticipate for our point. We believe Breakpoint will be stronger than Wildlands on the PRI side. Overall, why? Because it's coming with PVP from the very beginning, while it was not the case for Wildlands. We can have a stronger fan base that we can build upon from Breakpoint, and we will come with a two-year post-launch program that will be even bigger than on Wildlands. That will be supportive of stronger PRI for Breakpoint. Of course, it's good to see that Wildlands continues to do well. On Q4, yeah, it's good news that Cyberpunk is not in the quarter, we will stay cautious on this. We still keep to our assumption that we might have a strong potential competition in Q4.
The key point for us was really to have a fantastic reveal with Watch Dogs at E3, that's what we achieved. Coming with such a strong industry innovation. That supports our guidance, we believe that our guidance across our game in Q4 is a good reflection of all the potential of the games and of the potentially strong competition there.
Thanks, guys.
We will now take our next question from Doug Creutz of Cowen. Please go ahead.
Hey, thank you. You guys talked about how your engagement with Assassin's Creed has been strong pretty deep into the game cycle. I think you just released your last planned DLC for the game this week. Given how strong it's been, any appetite for further DLCs for Odyssey, or do you need to now kind of move, shift your development resources towards the next title? Thanks.
We are shifting the development to other projects, and that team particularly is working on Gods & Monsters. We are very happy with what they have been able to achieve with Odyssey. What is to consider is that they just released a Story Creator Mode that is going to help players to create content. We are also going to come with the discovery mode in September. There's plenty to come again on Odyssey, and they are working very hard on Gods & Monsters, I think this will be amazing.
Okay. Thank you.
Okay, sorry.
We will now take our next question from Julia Matoshchuk of Morgan Stanley. Please go ahead.
Hi, good evening. First one is regarding.
Julia, we can't hear you.
Oops, sorry, guys. Hi, can you hear me now?
Yes.
Yes. Perfect.
Great. Thank you very much. Sorry. The first question is regarding your Q2 guidance. You mentioned that it includes early shipments of Ghost Recon Breakpoint, but to the lower extent than what you had on Assassin's Creed. Is it right to assume that internally, you assume that Ghost Recon is a smaller game than Assassin's Creed? That's the first question. The second, can we have a bit of guidance on what you expect regarding profitability in the first half of the year? Thank you.
On Ghost Recon, as it is a multiplayer game, the digital part will be actually stronger than on Assassin's Creed types of games. That's why we have less units sold in stores. It doesn't mean at all that it will be different from the other games.
For H1, we usually don't guide on the first half. To help you model anyway what you can anticipate for this first half. As you know, we have a year that is much more backloaded on the second half. For the first half, we're coming with lower impact from new releases. That's why we guided for net bookings to be down by EUR 120 million or so. We can anticipate that we might have some increase in direct costs. Of course, that will lead you to model for a lower EBIT than last year.
Okay, thanks.
You're welcome.
Thank you, Julia.
We will now take our next question from Jeff Cohen of Stephens Incorporated. Please go ahead.
Hey, guys. Thanks for taking my questions. I know there's been some backlash from the gamer community around the Epic Games Store and some of the exclusive deals that they've signed. I was curious if you could provide some color around sales of The Division 2 on that platform, maybe against your expectations.
We can't give much information on that because we have been with them for a short time now. What we can say is we are working very well and in hands to make sure we can grow the sales directly now between our Uplay store, which is doing extremely well, and the Epic store that is growing step by step. Overall, when you take Uplay and Epic store, we are very happy with what we are achieving.
Yeah, we did well on
Gotcha. Thanks
our Anno 1800 on Epic. The key point here is really that we continue to have a very strong momentum on Uplay.
Thanks. As a follow-up, could you maybe talk about the additional R&D spend required to bring a game to Stadia versus traditional consoles? Then maybe if you could just discuss your expectations for platform commissions on Stadia versus the PS4 and Xbox.
The extra cost to make sure the games work well on Stadia is not that high. It's part now of our pipelines, and we have a good relationship with Stadia to make sure it is profitable for us. We are not speaking about 2.0 types of games that will need more work. This, we will see more in the future, actually.
As for the platform commission.
Thanks. Congrats on the strong start to the year.
On the platform commission, we will let Google talk about it. What we can just say is that the financial equation is good for us.
Got it. Thank you.
Once again, ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one. We will take our next question from Tom Singlehurst of Citi. Please go ahead.
Hey, good evening. It's Tom here from Citigroup. Forgive the slightly crunchy voice, I've got a cold. Two questions, both slightly general in nature. The first was with respect to Uplay Plus. Just whether there's anything you can share in terms of market research data or anything like that, just around whether you anticipate the sort of target audience for Uplay Plus to be existing gamers or to be new gamers. I'm just trying to work out how additive that would be or whether it's going to be cannibalistic of the existing base. That was the first question. Second one was just a broader one on industry consolidation. Seen reports in the last couple of weeks, both about Sony and indeed Facebook considering sort of acquisitions of video game publishers.
I'm just wondering whether you have a general view on, I suppose, vertical integration, whether that's a risk or an opportunity for yourselves as we see the market consolidate. Thank you very much.
Thank you for your questions. In fact, on Uplay, what we like Uplay+ is that we have a fair amount of new players that are coming to this new offer. It's really part of our strategy to offer players many ways to get to play our games. We will have a majority, yes, of the usual suspects to come, but we are very happy with the new ones that are coming, and that will be also part of the new gamers in our universe and will be able to actually try all the different types of games we create so they can, after that, spend more time on our games.
Okay.
On Sony and Facebook acquisitions, I think what it shows is that content is key, and that as Ubisoft being able to create high-quality content, we are a good player of the industry, we can do more things with them. Sony, Facebook, but also all the players of this industry, and that is actually a good thing. Now on the acquisition, I think we can't say much about that.
That's very clear. Thank you very much.
Thank you.
There are no further questions over the phone at this time.
Okay. Thank you very much, everyone, and have a good evening or a good morning. Thanks again.