Ubisoft's Q2 report was delayed, but the news is ultimately good: strong bookings! But the journey to get there was a bit bumpy. Let's dive into what happened.
Firstly, a bit of background: the image shows the Ubisoft booth at the E3 2017 Electronic Entertainment Expo.
Ubisoft, the French video game giant (UBIP.PA), recently announced its quarterly results. However, the release was delayed by a week. The reason? An unexpected accounting change that led to a breach of a key debt covenant.
The original release date was set for November 13th, but it was postponed at the last minute. This prompted Euronext to halt trading of Ubisoft's shares and bonds, leaving investors in the dark.
So, what caused the delay?
It turns out the delay was due to a new panel of auditors requiring a restatement of the fiscal year 2025 accounts. This restatement was related to how Ubisoft recognizes revenue from its partnership deals. Previously, revenue from usage-based partnerships was recorded upfront. Now, under the new approach, revenue will be recognized gradually as services are utilized.
This accounting change had a significant impact. It caused Ubisoft's net debt to core profit (EBITDA) ratio to exceed the limit set in its financing agreements. Specifically, the ratio jumped to 1.81 as of September 30th, exceeding the 1.5 limit.
To address the breach, Ubisoft took action. They made an early repayment of approximately 286 million euros ($330 million) in outstanding loans. This repayment was made possible by the proceeds from Tencent's 1-billion-euro investment in Vantage Studios, a subsidiary managing Ubisoft's major franchises. This move is expected to reduce the company's debt, which stood at 1.15 billion euros at the end of September. The Tencent deal, announced in May, is expected to close soon.
Now for the good news: the Q2 results!
Despite the challenges, Ubisoft's second-quarter net bookings rose a remarkable 39% to 490.8 million euros, surpassing the company's guidance of around 450 million euros. This positive performance was driven by strong sales across its game catalog and a meaningful contribution from TV adaptations of its games. The company confirmed its full-year outlook for stable net bookings and an operating income around breakeven. For the third quarter, they forecast bookings of around 305 million euros.
Ubisoft's CEO, Yves Guillemot, also announced that full details of the new "Creative Houses" operating model will be unveiled in January 2026. At the end of September, Ubisoft's global headcount was 17,097, a decrease of about 1,500 over the past year, as the company aims to achieve at least 100 million euros in cost savings this year. Approximately 70 million euros of those cost reductions have been achieved in the first half of the year.
A final thought: While the accounting change caused a temporary setback, Ubisoft seems to be navigating the situation effectively. What are your thoughts on this situation? Do you think the new revenue recognition approach is a positive change? Share your opinions in the comments below!
