Ubisoft delays 2020 releases as Ghost Recon Breakpoint underperforms; slashes guidance

(Reuters) - French game maker Ubisoft UBIP.PA slashed its annual profit targets on Thursday and delayed its blockbuster game releases to the next fiscal year as its recently published Ghost Recon Breakpoint game failed to impress the players.

FILE PHOTO: A large display for the gaming company "UBISOFT" is shown during opening day of E3, the annual video games expo revealing the latest in gaming software and hardware in Los Angeles, California, U.S., June 11, 2019. REUTERS/Mike Blake

The company, known for its best-selling Assassin’s Creed franchise, now sees non-IFRS operating income at between 20 million euros and 50 million euros ($22.2 million-$55.5 million) with annual net bookings of about 1.45 billion euros, compared with its prior forecast of 480 million euros in operating income and around 2.19 billion euros in net bookings.

It also expects a negative cash flow from operations, it told analysts on a conference call.

The guidance was reduced by 93%, analysts from Jefferies said in a note to clients, adding that a “severe” market reaction was expected on Friday morning.

The profit warning resulted from a “sharp downward revision in the revenues expected from Ghost Recon Breakpoint and, to a lesser extent, The Division 2,” Ubisoft said.

“We have not capitalized on the potential of our latest two AAA releases. For Ghost Recon Breakpoint (...) critical reception and sales during the game’s first weeks were very disappointing,” Ubisoft’s CEO, Yves Guillemot, said in a statement.

He cited too short a time between the releases of live multiplayer games, too few “differentiation factors” in Breakpoint, and players’ rejection of game play innovations as reasons for the reduced targets.

As a result, Ubisoft decided to increase development time for its Gods & Monsters, Rainbow Six Quarantine and Watch_Dogs Legion games, postponing their releases to fiscal year 2020-21.

“Lower targets for 2020 were expected post Breakpoint but not the delay of all three other games,” Credit Suisse analysts said in a note.

This delay leads to five blockbuster games now scheduled for release in fiscal year 2020-21, Ubisoft said, targeting net bookings of 2.60 billion euros for 2020-21 and non-IFRS operating income of about 600 million euros.

The games will be published between the second and third quarters of fiscal year 2020-21, the company said on the conference call, adding it did not push back any other game release.

The two other titles scheduled for fiscal year 2020-21 will be disclosed at a later stage.

Jefferies’ analysts added that the combined profit guidance for fiscal-year 2020 and 2021 is “not simply shifting profit” but an overall guidance cut, according to its calculations.

Beyond 2021, Ubisoft expects to grow further by relying on its back catalogue following a game-heavy fiscal year 2020-21.

(This story corrects to “fiscal year 2020-21” instead of “2021,” paragraphs 8, 10, 11, 12 and 14)

Reporting by Piotr Lipinski in Gdansk; Editing by Dan Grebler and Matthew Lewis