UBISOFT ENTERTAIN : ® ENTERTAINMENT: UBISOFT® REPORTS FULL-YEAR 2011-12 RESULTS

Ubisoft^® REPORTS FULL-YEAR
2011-12 results

• Full-year sales: €1,061 million 

• Ongoing improvement in profitability: 

  • Current operating income¹: €56.0 million 

  • Net income excluding non-recurring items¹: €37.4 million 

  • Net cash position : €84.6 million 

• Initial targets for fiscal 2012-13 

Paris, May 15, 2012 - Today, Ubisoft released its sales and earnings figures for the fiscal year ended March 31, 2012.

Key financial data

* Including royalties but excluding future commitments.

Yves Guillemot, Chief Executive Officer, stated "Ubisoft achieved a 90% surge in current operating income in fiscal 2011-12, in the upper range of the targets announced a year ago. This achievement was notably spurred by strong growth in online/digital revenue. We ended the year in a solid financial position - all the while having continued to invest in the future - primarily thanks to better-than-expected cash flows. Lastly, thanks to our focus on ramping up our teams' online expertise, combined with the know-how brought in by our recent acquisitions and with the recruitment of specialized talent, we are now in a position to fully seize the numerous current and future opportunities of the video game industry."

Sales

Full-year sales for 2011-12 totaled €1,061 million, up 2.1% (or +3.9% at constant exchange rates) compared with the €1,039 million recorded for 2010-11.

Sales for the fourth quarter of 2011-12 came to €161 million versus €178 million in the corresponding prior-year period, representing a decrease of 9.6% (or -11.2% at constant exchange rates).

Fourth-quarter sales were in line with the guidance of between €150 million and €180 million issued when Ubisoft released its sales figures for the third quarter of 2011-12.

Ubisoft's performance in fiscal 2011-12 reflects the following:

• €578 million in revenue generated from games for core gamers, fueled by an excellent showing from Assassin's Creed^® Revelations and from the free-to-play game The Settlers^® Online, as well as the critical successes of Rayman^® Origins and Driver^® San-Francisco. 

• €483 million in revenue from casual games, driven by the exceptional ongoing success of Just Dance^®, the excellent momentum of the free-to-play game Howrse, and the successful launch of Rocksmith(TM). 

• A 110.8% leap in online/digital sales to €80 million (included in the core and casual games figures above).  

Main income statement items

Gross profit totaled €718.1 million, representing a significantly higher percentage of sales in 2011-12, amounting to 67.7% against 64.8% in 2010-11. Following the increase already observed in 2010-11, this further rise primarily reflects a sharp improvement in back catalog gross profit as well as the strong growth in online sales, which have very high margins.

Current operating income before stock-based compensation amounted to €56.0 million, representing a sharp increase on the €29.4 million reported in 2010-11. The 2011-12 figure falls in the upper range of the guidance announced a year ago of between €40 million and €60 million, and is in line with the Group's recent upward revised target of between €45 million and €65 million. It reflects the combination of the following factors:

• A €44.5 million increase in gross profit. 

• A €15.1 million reduction in R&D expenses, which came to €348.4 million, representing 32.8% of sales, versus €363.5 million (35.0% of sales) in 2010-11. The decrease was due to fewer High Definition games released during the year, partly offset by an increase in both royalties and certain non-capitalized online expenses. 

• A €33.0 million increase in total SG&A expenses to €313.7 million (29.6% of sales) from €280.7 million (27.0% of sales) in 2010-11: 

• Variable marketing expenses represented 16.7% of sales (€177.1 million) compared with 15.4% (€160.4 million) in 2010-11, an increase mainly attributable to growth in both the dance games and online segments.  

• Structure costs represented 12.9% of sales (€136.6 million) compared with 11.5% (€120.3 million) in 2010-11. This rise was primarily due to higher costs related to the online activity. 

Ubisoft reported operating income of €45.6 million for full-year 2011-12 (including €10.4 million in stock-based compensation), compared with an €80.4 million operating loss in 2010-11 which included €95.9 million in non-recurring charges and €12.6 million in stock-based compensation.

Net financial income came to €2.5 million (compared with net financial expense of €3.7 million in 2010-11), primarily breaking down as follows:

• €2.5 million in financial charges against a €5.0 million charge in 2010-11, which included a €3.6 million charge related to sales of tax carry-back receivables.   

• €3.4 million in foreign exchange losses, versus a €4.3 million loss in 2010-11. 

• A €8.5 million positive impact mainly from the sale of 3.2 million Gameloft shares (€5.7 million positive impact in 2010-11). At March 31, 2012, 3.2 million Gameloft shares were still recorded in the balance sheet.  

Ubisoft ended fiscal 2011-12 with net income of €37.3 million, representing diluted earnings per share of €0.39, versus a net loss of €52.1 million and a diluted loss per share of €0.54 one year earlier.

Excluding non-recurring items and before stock-based compensation, net income would have amounted to €37.4 million, representing diluted earnings per share of €0.39, versus net income of €21.4 million and diluted earnings per share of €0.22 for 2010-11.

Main cash flow statement and balance sheet items (unaudited)

Cash flows from operating activities came to €8.2 million versus €54.2 million in 2010-11. This reflects a negative €27.0 million in cash flow from operations (versus a positive €28.3 million in 2010-11) and a €35.2 million reduction in working capital requirement (against a €25.9 million reduction in 2010-11). Excluding one-time events and on a comparable basis, the difference between cash flows from operating activities in 2011-12 and 2010-11 showed an improvement of €15.9 million.

At March 31, 2012, Ubisoft had a net cash position of €84.6 million versus €99.2 million at March 31, 2011. This year-on-year change was primarily attributable to:

• The above-mentioned €8.2 million net cash flow from operating activities. 

• €25.5 million in purchases of tangible and intangible assets.  

• €1.3 million in buybacks of Ubisoft shares.  

• €13.7 million from the sale of Gameloft shares. 

• €17.5 million in acquisitions. 

• A €7.8 million positive effect from exchange rate fluctuations.  

Outlook

Full-year 2012-13

Yves Guillemot stated, "For 2012-13 we expect to see an increase of between 25% and 61% in current operating income¹ and positive cash flows from operating activities. Our efforts to constantly enhance the quality of our games, combined with the investments we have made in the fast growing Free-to-Play segment should result in a strong topline and profitability growth for our core gamers titles and for our online segment".

He went on to say "From a longer-term perspective, Ubisoft is positioning itself to capitalize on:

• the forthcoming arrival of the next generation of consoles which will be increasingly connected and will strongly boost the market thanks to a new qualitative leap and the integration of social games benefits and the item based model, 

• the ongoing strong growth in the Free-to-Play market for PCs, smartphones and tablets. 

Yves Guillemot concluded "These major opportunities will enable us to extend our global reach, increase our average revenue per user (ARPU) and therefore raise the profitability potential of each of our brands".

The Company's initial targets for full-year 2012-13 are sales of between €1,160 million and €1,200 million, current operating income1 of between €70 million and €90 million and positive cash flows from operating activities.

Sales for the first quarter of 2012-13
The first quarter of 2012-13 will see the following main launches:

• Tom Clancy's Ghost Recon Future Soldier(TM) for Xbox 360^®, PLAYSTATION^® 3 and PC, 

• more than 15 online and digital titles, including Trials Evolution on XBLA and Silent Hunter^® Online as a web-based Free to Play. 

The Group expects first-quarter 2012-13 sales to amount to around €115 million, up by approximately 11% on the first quarter of 2011-12.

Significant events

Market share: In the first three months of calendar 2012, Ubisoft was the number 3 independent editor in the United States with 7.0% market share (compared with number 3 and 8.2% one year earlier) and number 3 in Europe with 8.2% market share (compared with number 3 and 8.3%).
In calendar 2011, Ubisoft was the number 3 independent publisher in the United States with 8.4% market share (compared with number 3 and 7.3% one year earlier) and was also number 3 in Europe with 8.7% market share (compared with number 3 and 9.0%).

Equity Line: Set up of an equity line to strengthen Ubisoft external growth capacity. The Company will be able to carry out successive capital increases representing a maximum aggregate of approximately 9.9% of the share capital.

Grant of free share subscription warrants (BSA) : Shareholders have been granted one BSA per one registered share at the close of trading on April, 5 2012. 11 BSA will be exercisable for 1 new share, at an exercise price of €7.

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Disclaimer
This statement may contain estimated financial data, information on future projects and transactions and future business results/performance. Such forward-looking data are provided for estimation purposes only. They are subject to market risks and uncertainties and may vary significantly compared with the actual results that will be published. The estimated financial data have been presented to the Board of Directors and have not been audited by the Statutory Auditors. (Additional information is specified in the most recent Ubisoft Registration Document filed on June 28, 2011 with the French Financial Markets Authority (l'Autorité des marchés financiers)).

About Ubisoft:
Ubisoft is a leading producer, publisher and distributor of interactive entertainment products worldwide and has grown considerably through a strong and diversified line-up of products and partnerships. Ubisoft has offices in 26 countries and has sales in more than 55 countries around the globe. It is committed to delivering high-quality, cutting-edge video game titles to consumers. For the 2011-12 fiscal year Ubisoft generated sales of €1,061 million. To learn more, please visit: www.ubisoftgroup.com:
http://www.ubisoftgroup.com/.

© 2012 Ubisoft Entertainment. All rights Reserved. Fantazy Petz, From Dust, Just Dance, Rayman, Tom Clancy, Ghost Recon, Ghost Recon Future Soldier, I Am ALive, Might & Magic, Rabbids Go Home, Raving Rabbids, Silent Hunter, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Motoheroz  is a trademark of Redlynx in the US and/or other countries. Redlynx is a Ubisoft Entertainment company. © 2012 Ubisoft Entertainment. All Rights Reserved. Based on Prince of Persia® created by Jordan Mechner. Prince of Persia is a trademark of Waterwheel Licensing LLC in the U.S. and/or other countries used under license by Ubisoft Entertainment. © 2011 Ubisoft Entertainment. All Rights Reserved. The Black Eyed Peas is a trademark of BEP MUSIC, LLC in the US and/or other countries. The Black Eyed Peas® and all other logos and designs associated therewith are trademarks owned by The Black Eyed Peas. © 2011 Universal Network Television LLC. House M.D. is a trademark and copyright of Universal Network Television LLC. Licensed by Universal Studios Licensing LLC.  All Rights Reserved.

APPENDICES

The Statutory Auditors have completed their audit of the consolidated financial statements. They will issue their audit report after verifying the Group's annual financial report.

Consolidated income statement

Consolidated balance sheet

Consolidated cash flow statement for comparison with other industry players (Unaudited and not included in the consolidated financial statements)

* Proceeds from sales of Gameloft shares are now allocated in Investing Activities

Consolidated cash flow statement

* Proceeds from sales of Gameloft shares are now allocated in Investing Activities

Reconciliation of Net income before non recurring elements and stock based compensation