Ubisoft Entertainment SA

Instructor: Gérard DESPINOY

Group 17: Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra
Date: 15 February, 2022

Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra 1
Overview
Business definition Strategies Key figures (31st Dec 2020)
 Behavioral, and Economic pillars:
 Ubisoft Entertainment SA was founded in 1986 and  New gaming occasions and gamer segments
is headquartered in France
 Ubisoft Entertainment SA (Ubisoft or "the group") is
present a material opportunity Total revenue $2,241 million
 According to OC&C and Google Joint report on
a producer, publisher and distributor of interactive gaming industry, Average players spend more
entertainment and services. the Group ’s main hours/week in 2018 than in 2011 Gross margin 85%
business activities are centered around the  Gaming-as-a-Service:
production, publishing, distribution and “operation”  Ensuring continued engagement within a game’s
of video games for consoles, PC and Smartphones.
 It also distributes games developed by other
universe will become crucial, increasing the
importance of post-launch
Net margin 5.0%
companies. The company also designs and sells  Using a range of alternative revenue models to
clothes, accessories, collectables, and art grow revenues outside of upfront purchase. Doing
 through its e-commerce site Market Position
so will require a deeper knowledge of customer
 It has 21,000+ employees all over the Europe
behavior, and exploration of new revenue streams
in mid-long term 2021
 The changing nature of video games & Emerging
Featured Games
cloud gaming platforms: 13%
15%
 New platforms and technological advances present
opportunity to evolve game formats 7%
 Cloud gaming platforms threaten to disrupt the 10%
34%
traditional routes to market for publishers
 The platform landscape is shaping up to be highly 22%
competitive, and differentiation will be key
Take-Two Interactive Software Inc Activision Blizzard Inc
Electronic Arts In Ubisoft Entertainment SA
Nintendo Co Ltd International Game Technology

Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra 22
 Overview

Operating segments breakdown Geographical & platform breakdown Business drivers

14%
 Ubisoft will benefit from numerous solid drivers of
growth with significant opportunities in the digital sector
generated by the extension of the multi-player and social
44% gaming experience and by even greater integration of Live
services.
41%  The Group will also benefit from the strong growth
potential of the mobile and PC segments, particularly in
the Asian market, and the growing footprint of e-sports.
The growth can be attributed to a variety of factors such
Distribution EMEA as: -
North America Distribution Zone
 Technological enhancements in internet speed
Publishing/ production activities
 Number of players (reaching wider demographical
 Ubisoft’s Distribution EMEA segment includes range over wider range of platforms)
distribution of all kinds of multimedia and  Cloud-gaming platforms( reduction in fixed costs
audiovisual products, and IT products, especially + emerging of never-ending games)
video games, educational and cultural software,  Digitalization increasing the market penetration
cartoons and literary, cinematographic and television
 The North America Distribution Zone segment
includes distribution of all kinds of multimedia and
audiovisual products, and IT products
 The Publishing/ Production activities segment
includes production and publishing of video games
for consoles, personal computers, smartphones and
tablets in both physical and digital formats.

Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra 33
 Company Financials

CAGR - Long-term Sales Growth Cash F low A s A P er centage O f S ales

20.00% Operating Investing Financing
18.00%
-39.04% 2021 43.07% 20.86%
16.00%
-56.74% 2020 37.65% 27.06%
14.00%
-2.16% -35.12% 2019 52.69%
12.00% -43.88% 2018 39.91% 2.76%
10.00% -45.59% 2017 44.23% 27.17%
8.00% -3.70% -38.15% 2016 24.44%
6.00% -32.88% 2 0 1 5 44.69% 12.57%
4.00% -45.43% 2014 28.88% 16.80%
2.00% -31.33% 2 0 1 3 32.06% 2.32%
0.00% -2.19% -35.64% 2012 33.73%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Operating/Investing/Financing Cash Flows

Operating and Net Income as a percentage of sales

Notable facts
15.00%
• Long – term sales growth, operating and net income dips the in
10.00%
2014 and 2020.
• Significant investment expenditure in the year 2020.
5.00%

0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

-5.00%

-10.00%

Operating Income Net Income

Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra 4
 1
5

02
/2
/9 1
12 /202
8 1
9/ /202
8 1
6/ 202 20
4/ 0
3/ 0/2 0
/3 2
11 8/20 0
2 2
8/ / 20 0
28 2
5/ / 20 9
21 01
2/ 9/2 9
/1 1
11 9/20 9
1 1
8/ 7/20 9
1 1
5/ /20
11 18
2/ 6/20
/ 8
11 201
6/ 8
8/ 201 8
4/ 1
5/ / 20 7
29 01
1/ 4/2 7
/2 1
10 4/20 7
Ubisoft Stock Price

2 1
7/ 0/20 7
2 1
4/ /20 16
16 0
Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra

1/ 13/2 6
/ 1
10 / 20 6
13 1
7/ / 20
12 6
4/ 201
7/ 15
1/ 2/20
/ 5
10 201 5
2/ 1
7/ /20 4
27 01
3/ 2/2 4
/2 1
12 9/ 20 4
1 1
9/ / 20 4
19 1
6/ / 20 3
17 01
3/ 0/2
/1 3
12 /201
9 3
9/ 201
7/ 3
6/ 201 12
4/ 0
3/ 3/2 2
/2 1
11 3/ 20 2
2 1
8/ / 20 2
23 1
5/ / 20
16
2/
120

100

80

60

40

20

0
Price per share (€)
Median
Indust.
125.19 Million
€6.309 Billion

38.5

19.3
15.7
3.2
3.0
9.4
Valuation Ratios
€50.4

72.6
3.62

15.2
UBI

2.7
6.7

8.6
EV/Revenue
Market Cap
Valuation

Share Price

EV/EBITDA
P/B Ratio
PE Ratio

EV/EBIT
NOSH

P/FCF
 Company Outlook

Analyst Views
JP Morgan - Price target: €55.00
Daniel Kerven “UBI has made significant investment in recent years into new IP & business models, the benefits of
which are yet to be fully reflected in forecasts - its development capability is under-monetised.
Greater visibility over its release schedule would allow us to increase our valuation to €75/share.”
Barclay – Price Target: €43.50
Nick Dempsey The recent release of Rainbow Six Extraction, a deal that includes Extraction in Xbox Game Pass will
likely to provide some upfront revenues for Ubisoft in this quarter. However, it is worth noting that
the newly launched game lacks its own identity and doesn't stand out well enough vs other co-op
shooters, making it doubtful whether the game can attract many players in the long term.

Geographic ownership Ownership Type BREAKDOWN OF NET VOTING RIGHTS

80.00% 20.00% 17.55%
45.00% 40.29% 69.20%
70.00% 16.00%
40.00% 12.00%
60.00%
35.00% 8.00%
25.60% 50.00% 4.00% 1.42% 1.10% 0.66% 0.68% 0.16% 0.11% 0.66%
30.00%
40.00% 0.00%
25.00%
20.00% 30.00%
12.62% 17.53%
15.00% 20.00%
10.00% 8.93% 4.54% 10.00% 5.83% 3.07%2.88%
0.99% 0.24% 0.16% 0.04%
5.00% 2.07% 1.78% 0.00%
0.00%
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Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra 6
 Market Forecast

Market Size Forecast Market Share Forecast

Market Size Forecast 2021

50000 46030
45000 41088
40000 36675 15% 13%
35000 32737
29222
30000 26084 7%
25000
20000 10%
15000 34%
10000
5000 22%
0
2021 2022 E 2023 E 2024 E 2025 E 2026 E
Take-Two Interactive Software Inc Activision Blizzard Inc
Electronic Arts In Ubisoft Entertainment SA
Ubisoft Size Forecast Nintendo Co Ltd International Game Technology

8000 2026 E
7000 336
291 313
6000 271
338 252 11%
2,874 19%
5000 2,676
2,492
4000 2,321
2,215 2,161 12% 27%
3000
2000 3706 5% 8%
2993 3214 3451 17%
2595 2787
1000
0
2021 2022 2023 2024 2025 2026 Take-Two Interactive Software Inc Activision Blizzard Inc
Electronic Arts In Ubisoft Entertainment SA
Total Revenue Gross Profit EBIT Nintendo Co Ltd International Game Technology
Others
Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra 77
 Thank You
Group Members:
Vansh Gupta – B00782447
Shih-Lin Chang – B00793465
Mohamed Amine Bouhali – B00758570
Himanshu Bohra – B00791563

Ubisoft Entertainment SA | Firm Valuation, Gérard DESPINOY| February 15, 2022| Mohamed Amine BOUHALI, Shih-Lin CHANG, Vansh Gupta, Himanshu Bohra 8