Good day and thank you for standing by. Welcome to the Ubisoft Update Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I will now like to hand the conference over to your speaker today, Yves Guillemot. Please go ahead. Welcome, everyone, and thank you for joining the call today on such a short notice. We are clearly disappointed by our recent performance. We are facing contrasted market dynamics as the industry continues to shift toward mega brands and long-lasting live games in the context of a worsening economic condition affecting consumer spending. Despite excellent ratings and players' reception, as well as an ambitious marketing plan, we were surprised by Mario + Rabbids Sparks of Hope underperformance, particularly in the final weeks of 2022 and beginning of January. Just Dance 2023 Edition underperformed as well. In this context, we have had to update our revenue expectations with more prudent assumptions for this year as well as for the coming years. As a consequence, we are taking new meaningful decisions that are needed to continue adapting our organization to further strengthen our execution and to ensure we both deliver amazing games as well as great value creation. While many challenges lie ahead of us, the industry's long-term prospects remain promising, and I am convinced Ubisoft is well-positioned to benefit from its momentum, thanks to the strengths of our teams, brands, production capacity, technology and balance sheet. Our back catalog remains very healthy, with notably a robust activity from Rainbow Six Siege, great momentum from our Assassin's Creed games, and generally solid performance from our live games. With the decisions we announced today, we want to push even more on our strategy to transform our biggest brands into truly global phenomenon, with multiple offerings across platforms and business models, and to build long-lasting live games. While these investments have yet to be released, they will ultimately generate significant value creation with strong top line and operating income growth over the coming years. I will now let Frédéric detail the actions we are taking today and review our financial targets update. Thank you, Yves, and hello, everybody. The context Yves presented has triggered a full review of our revenue prospects, leading to increased cautiousness and lower revenue expectation over the coming years, as well as a set of strategic and operational measures. This increased cautiousness, together with the significant investment that resulted from lockdown and the new working patterns that both had a profound impact on productions across the industry over the past 3 years, leads us to engage into a set of measures dedicated to strengthening our long-term growth and value creation prospects. First, ensure all our energy is focused on building among the most powerful brands and live services in the industry. As a consequence, we decided to cancel 3 unannounced projects on top of the 4 already canceled last July. This will allow us to progressively increase our share of investment behind the development of our biggest franchises, starting with Assassin's Creed, Rainbow Six, Far Cry, The Division and Ghost Recon, as well as into the strengthening of our live services. Second, depreciate around EUR 500 million of capitalized R&D concerning upcoming premium and free-to-play games and the newly canceled titles. This notably reflects the increased cautiousness on revenue related to the current changing video game market and the macroeconomic environment, as well as the necessary increased focus on fewer titles. Finally, adapt our organization to a more challenging environment with an expected net reduction of our non-variable cost base of more than EUR 200 million over the next two years in order to be more competitive and efficient. This will be achieved through targeted restructuring, divesting some non-core assets and usual natural attrition. Non-variable cost base include all structural costs and R&D cash investment and exclude elements such as performance-based royalties or profitability bonuses. This base is estimated to a projected amount of around EUR 1.8 billion in fiscal 2023. We have also revised our expectations for Q3 and the year and provided an initial target for next fiscal year. We now expect Q3 net bookings at approximately EUR 725 million, mostly driven by the underperformance from new releases and to a lesser extent, from partnership and our back catalog casual mobile games. Regarding Q4, we have announced today that Skull and Bones will now be released early fiscal 2024. The additional time already provided to the game has been supportive to the overall quality, and we believe the extra time will enable us to have more time to showcase the game's progress and build awareness. All this considered, we are revising our full year targets. Full year net bookings are now expected to be down at least 10% year-on-year, versus our prior expectation of at least 10% growth. This primarily reflects the previously mentioned impact from our fiscal 23 new releases, which combines the postponement of Skull and Bones and the underperformance of our Q3 launches. To a lesser extent, the impact from partnerships and softer back-catalog on casual mobile games. Full year non-IFRS operating income is now expected at around minus EUR 500 million versus around EUR 400 million previously. This reflects two points. Around EUR 400 million impact from the expected lower net bookings in fiscal 2023. Second, the depreciation of capitalized R&D of around EUR 500 million I mentioned earlier. We are introducing today our fiscal 2024 non-IFRS operating income target of around EUR 400 million, reflecting necessary prudence in light of the current challenging environment, while still expecting a strong top line growth. As you said, we can rely on a strong balance sheet with around EUR 1.5 billion in cash and cash equivalents after reimbursing the EUR 500 million bond expiring at the end of this month. We believe our fast and decisive reaction and our additional cost optimization measures should help us navigate the current challenging economic environment and enter the coming years with a leaner organization. We are now ready to take your questions. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. We will now take the first question. One moment, please. It comes from the line of Charles-Louis Scotti from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Hello, good evening. I have one question on your- Good evening. Good evening. On your full year 2023, 2024 target. Can you give us a little bit your, you know, assumption behind this EUR 400 million target? Especially on the free-to-play, upcoming games. When should we expect those free-to-play games to be released? Don't you think that this target might be a little bit aggressive considering that the upfront negative impact of free-to-play release on earnings, initially? Thank you. Thank you, Charles-Louis. We believe we have taken the right level of cautiousness. It's too early to provide more details on fiscal 24. You know already the free-to-play games that we have unveiled. What we are planning is to launch several free-to-play games from our biggest franchises next year. It means. Overall Sorry? This means that no free-to-play games, either mobile or PC, are expecting to be released before the fiscal year end, March 2023. Indeed. Fiscal 2024, we'll be relying on the rich and strong lineup overall. We have already communicated about Avatar: Frontiers of Pandora, Assassin's Creed Mirage, Skull and Bones, and there will be other premium non-announced games, including a large one. Okay, thank you. Just one quick follow-up question from the EUR 200 million cost savings over the next 2 years. Can you have an idea about the phasing of this cost savings between this year and the next one? We won't provide any more detail today, so we'll keep you updated as along the way as we complete each and every milestone. Okay. Thank you very much. You're welcome. Thank you. We will now take the next question. It comes from the line of Nick Dempsey from Barclays. Please go ahead. Your line is open. Good evening, guys. I've got three questions. First of all, just on the EUR 200 million of savings, do you have an idea of the cash restructuring charge that you will need to take out those savings so that we can capture that? Second question, you previously referred to a kind of standard revenue growth going forward of above 10%. That's what you've been aiming for in terms of what you've been investing in cash R&D. You've clearly got some revisions about how you're thinking about your business in the market. Can you give us any indication of what you could now hope for in a normal year in terms of top line growth? Third question, I mean, we've seen some pretty big successes from Call of Duty and God of War in the last couple of months. The macro environment doesn't seem to be impacting the spending on those games. Is it that when the consumer is stretched, they just go for the largest games, the ones they're most excited about, and that's causing the problem? Is there some other difference between those two games and what you have been experiencing? Good evening, Nick. On the first question, we'll provide more detail at a later stage. In terms of the future growth that we are today, we see that we have, as we said in the past, and that's still very true, the richest pipeline of products in the company's history with AAA coming in the future. We mentioned that we have taken an increased level of cautiousness, but we still relying on strong growth coming in in the future years as our strategy is really adapted to where the market is going. Yes, on the concentration of the gains, what we can see is, yes, when there's more pressure, people go for the biggest brands, and they don't go to the small ones. Okay. Thank you, guys. Thank you. Thank you. We will now take the next question. It comes from the line of Nicolas Langlet from BNPP Exane. Please go ahead. Your line is open. Hello. Hello, everyone. I've got three question, please. The first one on Mario + Rabbids Sparks of Hope. Can you tell us how the game is performing compared to the previous title? Do you understand what went wrong, and what is the plan to support the game in the coming quarter? Second question, are you able to split the EUR 500 million R&D depreciation between the free-to-play and the console games? Are there other projects in your pipeline currently under review, or you think you have now cleaned the portfolio? Finally, can you tell us what is the contribution you expect from the licensing agreement this year? Whether the amount you plan to book has changed compared to the previous quarter? Thank you. First, what we can say about Rabbids is that the game is extremely, is really well appreciated by players. We are getting a community ratings, a rating that is excellent. We feel that the game is going to do good numbers over time. The beginning was not at the level we expected. On the depreciation and R&D, Nicolas, we won't provide any more detail at this stage. What we said is that it's a balance of accelerated depreciation across premium and free-to-play games. Indeed, that includes, of course, impact from canceled games. If we look at the current depreciation, beyond console games, we have taken a pre-depreciation on future to-be-launched games, as well as on already launched games. Okay. Very we have made a thorough review. There, we believe that we have made the right decision. Of course, we'll continue monitoring the market evolution, but we believe that what we concluded and what we are announcing today is the right level of depreciation. In terms of the contribution of licensing agreement, there is no change to what we said before. Okay. Okay, very clear. Thank you. Thank you, Nicholas. Thank you. We will now take the next question. It comes from the line of Thomas Singlehurst from Citi. Please go ahead. Your line is open. Oh, hi there. Can you hear me? Hopefully, you can. Sure. Um. Better now. Yeah, obviously a very disappointing update. I'm interested in a couple of things. Slightly clutching at straws, I suspect. I'm interested in whether you think there was anything sort of behavioral in the calendar Q4 that might have impacted demand. I'm in particular thinking the impact of the World Cup and FIFA for what it's worth. You know, was the timing of large sporting events, do you think, you know, a variable in weaker sort of aggregate market demand? Do you just think there is a narrowing of demand and it didn't, you know, benefit your titles? Any thoughts on that would be appreciated. Secondly, on the cost saves, I mean, obviously you were looking for sort of flat SG&A costs before. In that context, you know, how incremental is the EUR 200 million of optimization? What's the phasing? How much of that is actually expected to come through in the 2024 financial year? Is the EUR 400 million of operating profit guidance, is that a sort of normalized run rate profit or, you know, should we expect another small kicker from lower costs in 2025 as well? Thank you. Yeah, thank you, Tom, for your question. On the first question, we have not made any link from our observation and analysis to the World Cup event. What we've observed and analyzed is that there has been some contraction in overall consumer spending coming from the we're economic environment and inflation rising. As you've mentioned, that has led the biggest megabrands and live services taking a usually higher share of the market, leaving less available consumer spending currently to other launches. That's the clear conclusion that we've taken. We've seen that our games were high quality, but there have been other games of high quality that underperformed from what we could analyze from the market evolution. Rainbow Six did extremely well at the end of the year. It's the big brands that took the business. For sure, the World Cup had an impact, but it's difficult to quantify. Yes, we very consistent with the market. We see that our biggest brands are in very good shape, and our live services continue to perform well across the board. On the cost savings, what we had said before is that we were anticipating R&D investment to be stabilized next year versus fiscal 23. While we will in the course of fiscal 24, as a running rate on the structural costs, get back in line with fiscal 22. What we are announcing today is a very significant addition, additional saving that we are planning to achieve within the next two years. As I said before, we won't provide any more detail on the phasing so for now, but we will keep you updated along the way as we complete each and every milestone of what we plan to do. If I can ask one follow-up on the sort of narrowing of focus. I'm just, it comes back to the previous question about whether it's Free-to-play or sort of traditional pay-for games. I mean, obviously you narrowing focus and reducing investment also means that you're obviously expecting less revenue. I'm just trying to work out whether that's, you're doing that because you're implementing a fundamental strategic shift, or whether this just reflects the fact that you can't afford to fight on as many fronts as you were. I'm trying to work out whether, you know, Whether this is a, you know, a considered really sort of closely worked out plan or whether it's just a reaction to this poor quarter. What we're saying is that we had already said back in July that we wanted to focus even more on our big, building our biggest franchises. In the light of what we recently analyzed, we're saying that we are accelerating and amplifying that focus moving forward. That's why we decided to cancel another three projects. We believe that by focusing even more our R&D investment into building truly global brands with, starting with our biggest franchises and building stronger live services is exactly where the market is going. That's why we believe it's the right strategy evolution to what we already have done before. Perfect. Well, thank you. Thank you. We will now take the next question. It comes from the line of Brian Fitzgerald from Wells Fargo. Please go ahead. Your line is open. Thanks, guys. When we, when we think about Ubisoft and you've commented on this, with your back catalog strength, it's an asset there. With 23, the release slate across the industry is really robust. Does that worry you about, you know, such strong pipeline of new releases, this concentration around, you know, mega titles? What does that mean for back catalog strength and back catalog sales? Should that be pressured going forward? What we see that on our big franchises, high quality titles and the live service types of back catalog, the trends are really healthy. What we have mentioned as part of our communication is that the part of our back catalog that is more relying on the mobile casual is more under pressure. What we saw as well is that the back catalog, even when there are big launches, big releases, is still strong because the price point of that catalog is also very, it's actually a lot lower than the new releases that are coming now more, very often at close to EUR 80, $70. Got it. Thanks, guys. Thank you. Thank you. We will now take the next question. One moment, please. It comes from the line of Douglas Creutz from Cowen and Company. Please go ahead. Your line is open. Hey, thank you. Just with regard to your comment that sales of Just Dance and Rabbids were soft towards the end of December and early January, are you referring to a sell-in number or a sell-through number? Sell-through. Okay. That was it. Thank you. Thank you. Thank you. We will now take the next question. It comes from the line of Adrien De Saint Hilaire from Bank of America. Please go ahead. Your line is open. Thank you very much. Hopefully, you can hear me okay as well. I've got Sure. Few questions, please. Perhaps Frédérick can tell us how much free cash flow you would expect based on the -EUR 500 million of non-IFRS operating income for fiscal 2023. For fiscal 2024, if I understand correctly, you're planning to release four AAA titles, 'cause Skull and Bones apparently is scheduled for fiscal 2024, given what you just said. I think in the past, it's been always a bit of a challenge to release more than three. Can you just explain a bit if that is indeed the plan and how you plan to achieve that? On the cash flow from operations, we are changing our guidance for fiscal 2023 from positive to negative. I'm talking about cash flow from operations here. As for fiscal 2024 in terms of lineup, it's true that we had to postpone a number of games, so they are now very well advanced to be well released in fiscal 2024. We believe that we have the capacity to release such a rich pipeline. Also you have to consider that Skull and Bones will be at the beginning of the year. Okay. Thanks. Thank you. Thank you. There are no further questions at this time. I would like to hand back over to the speakers. Thank you very much for your questions and for listening the call, and have a good day. That does conclude our conference for today. Thank you for participating. You may all disconnect.