Ubisoft Entertainment Stock

Good day, and thank you for standing by. Welcome to the Ubisoft Q1 Fiscal Year 2027 Sales Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Yves Guillemot, Ubisoft Co-Founder and Chief Executive Officer. Please go ahead.

Welcome, everyone, and thank you for joining the call today. We delivered first quarter net bookings slightly above our guidance, led by a record performance from Invincible Guarding the Globe.

The rest of the catalog, including Rainbow Six Siege performed in line with our expectations. We also continue to execute our transformation. This included further targeted rightsizing actions and the ongoing reconcentration of resources towards our highest potential opportunities.

At the same time, the leadership of our new operating model and organization continues to take shape, including the appointment of Christoph Hartmann, the lead creative out in building a world-class portfolio of battlefield-driven experiences.

These franchises include Ghost Recon, The Division, Splinter Cell and March of Giants. Christoph joins us with nearly 30 years of experience, building, scaling and operating global gaming organizations, having notably spent 20 years at Take-Two, where he supported the early releases in the Grand Theft Auto franchise and co-founded 2K games.

The strong launch of Assassin's Creed Black Flag Resynced by Vantage Studios in early July is an encouraging proof point.

The game is the highest rated Assassin's Creed title since the original Black Flag, and we are very pleased with the praise it has received from players.

Two weeks in, the title has already exceeded the annual expectation we had. I would like to warmly thank the teams whose talent and dedication brought it to life. This launch tells us 2 things. First, it's a reflection of the enduring strength of Assassin's Cree brand.

Second, it's an illustration of the early benefits of the ongoing transformation and commitment to deliver very high-quality experiences, notably enabled by the revamped cutting-edge proprietary engine and deal engine.

Finally, today, we have confirmed our financial year '26-'27 objectives and midterm outlook. Financial year '26-'27 remains a year of disciplined execution as we continue to implement our transformation, invest behind our strongest opportunities and prepare for significantly stronger content cycle.

We are confident this new operating model will strengthen our position as a leading creator of high-quality, memorable and engaging entertainment experiences and enable the group to return to a stronger trajectory of performance, cash generation and long-term value creation. With that, I will hand over the call to Frédérick. Frédérick?

Thank you, Yves, and hello, everybody. Our Q1 net bookings stood at EUR 256 million, down 9% year-on-year and slightly above guidance.

As I said, this outperformance was driven by a record quarter for Invincible: Guarding the Globe, while the rest of the catalog performed in line with expectations. The quarter included around EUR 15 million of pre shipments linked to Assassin's Creed Black Flag Resynced, in line with what we had planned for.

The year-on-year decline mainly reflects significant bookings from Assassin's Creek Shadows in the prior year quarter. You will recall that having been released on March 2025, Shadows had a significant contribution in the following quarter.

Back-catalog bookings and digital net bookings stood at respectively, EUR 220 million and EUR 206 million, down 15% and 18% year-on-year, both reflecting the Shadows impact I just highlighted.

PRI stood at EUR 151 million, stable year-on-year and representing 59% of our total net bookings. Let me now give you some color across the catalog.

Rainbow Six each performed in line with expectations this quarter. Your 11 Season 2 delivered one of our best battle pass conversion rates for a season without a new operator and the meta-driven rotating changes brought depth and variety to the experience.

Overall, average DAUs throughout the quarter were slightly up on the back of a comparison base that benefited from the launch of Siege X and its free entry point in June of last year.

Looking ahead, Season 3 will introduce a new ship counter defense operator, a highly requested edition and the Legends division, a new playlist targeting core competitive players.

Other live services titles were also supported by the regular rollout of new content. The Division 2 released year 8 Season 1 this quarter, which helped deliver improved monetization trends year-on-year, driven by virtual currency conversion and DARPU Records.

The Crew Motorfest benefited from the NASCAR-themed Season 9 that released in March as well as the RC Frenzy Playlist and the inclusion in the PS+ subscription service, which all drove robust year-on-year growth in active users and session days.

Finally, mobile bookings stood at EUR 48 million, significantly up year-on-year, reflecting a standout performance for Invincible: Guarding the Globe, developed by Ubisoft Barcelona mobile studio.

The title exceeded expectations this quarter, 2 years after launch, already surpassing the prior full fiscal year.

Momentum built through the period, thanks to the March release of the TV series fourth season and the introduction of a new in-game character, which together drove meaningful player acquisition, retention and monetization.

Now turning to the lineup. Assassin's Creed Black Flag Resynced released on July 9, and as I said, is off to a strong start. It sold in 3.5 million copies to date, exceeding annual expectation within its first 14 days.

The game is praised by critics and players alike with a current 84 review score on Metacritic and OpenCritic, making it the highest rated Assassin's Creed game since the launch of the original Assassin's Creed IV Black Flag in 2013.

Following launch, player sentiment continued to strengthen and the game showed robust player engagement with a record performance for the franchise on PC as it reached a peak of around 105,000 concurrent players on team, the highest ever recorded for an Assassin's Creed title on this platform.

This translated into a historical proportion of sales for the franchise on PC, led by the U.S. and Chinese markets.

We think demonstrates Ubisoft's ability to leverage proven catalog brands for remakes to win over a whole new generation of players while allowing long-time fans to rediscover a well-improved iconic games.

In the same spirit, we revealed Rayman Legends Retold to be released in October, making the franchise 30th anniversary. Early hands-on coverage has been encouraging with press highlighting the new visuals and cinematics, expanded worldbuildings and new gameplay additions that build on the original celebrated foundation.

This premium remake, co-led by Ubisoft Montpellier and Milan, reimagined the acclaimed platformer in full 3D, deepen its world and introduces fresh gameplay ideas while preserving the original DNA.

On top of these 2 games, the lineup for the rest of the fiscal year also includes Just Dance's Decades of Hits, scheduled to release on October 13, as well as targeted premium titles based on established Ubisoft brands to be announced at a later stage on top of continued Live Services content updates across the portfolio.

August will be an important month for Rainbow Six Siege and Trackmania, which will be represented at the Esport World Cup in Paris, bringing together some of the best players in the world and showcasing our brands on one of the biggest stages in Esports.

We also continue to execute on our cost reduction initiatives. In June, we announced the closure of the Winnipeg and Belgrade studios, targeted changes across the Group's Global Publishing organization and the restructuring at the Ubisoft Barcelona HD Studio.

These are difficult decisions, but necessary steps as we concentrate our resources on our highest priority projects and further improve quality delivery to exceptional levels in a consistent manner.

Turning to the outlook. We've confirmed our fiscal '27 guidance today and continue to expect net bookings down by a high single-digit percentage, a high single-digit negative non-IFRS operating margin and free cash flow consumption of no more than EUR 500 million.

Additionally, the fiscal '27 housekeeping items for modeling purposes I provided during the full year earnings call mid-May are unchanged.

On the balance sheet, as we said back in May, we have sufficient liquidity to address the near-term maturity using cash on hand. We are reviewing available financing options with the objective of addressing upcoming maturities, extending the group's debt profile and maintaining financial flexibility.

This review is actively progressing with a way to executing the most efficient financing scheme in due course. Beyond fiscal year '27, we expect an important rebound with a return to positive free cash flow generation and non-IFRS EBIT in fiscal year '28, robust free cash flow in fiscal '29 and positive cumulative free cash flow during the fiscal '27 to fiscal '29 period.

Finally, we expect Q2 net bookings of around EUR 370 million, keeping in mind that Q2 of last year included significant partnerships, while we only factored in for a limited impact in this Q2 guidance. I'd like to hand over the call to Yves for concluding remarks.

Thank you, Frédérick. Before we close the call, I would like to take a moment to sincerely thank everyone for their outpouring of support following the tragic death of my brother, Claude.

As many of you know, Claude co-founded Ubisoft alongside Christian, Gerard, Michel and me.

He played a key role in building Ubisoft and its iconic brands. He also was always genuine and generous, sharing his kindness, wisdom, optimism and energy with everyone he met. He will be dearly missed. Thank you again for your support. We are now ready to take your questions.

[Operator Instructions] And your first question today comes from the line of Nick Dempsey from Barclays.

I've got 2 questions, please. So first of all, can you talk about the likely margin profile of a game like Assassin's Creed Black Flag Resynced, so a remake that has sold well ahead of your expectations.

Can you tell us whether you've already covered your costs for that game and whether it should make a better contribution to non-IFRS operating income than a typical game? Second question, I heard your comments on the debt refinancing. Can you maybe give us an indication of when you will be able to communicate to the market when you have a plan in place to address the financing of those debt maturities, particularly the puttable 2028 converts due in November?

So yes, the margin profile of a game like Assassin's Creed Black Flag Resynced should be attractive.

First, because it's planned to be a success with a strong start. Usually for remakes that are ambitious, you have a reuse of the existing assets of the original experience, but you also come with additional game play and features.

So that still come with some investments. But of course, the overall budget is not as high as the original experience. You also benefit from the awareness of the game, so you can come with lower marketing, but you don't have the same price as a full game.

So it's really a different economic profile, but we expect this one to deliver superior financial performance. We should expect the direct contribution to be positive as soon as this current quarter in cumulative terms.

In terms of refinancing, as we said, we are looking at different options. So we won't make any more announcements today. But we have a high cash position as we speak.

So as we said back in May and in February, we can use it to address any near-term maturity. And we are looking at different options to work the upcoming maturities with the objective to really optimize the cost of capital. So that's what we can say at this stage, and we will update the market in due time.

Our next question today comes from the line of Nicolas Langlet from BNP Paribas.

I've got 2 questions, please. First, you said that Assassin's Black Flag Resynced already reached the annual performance expected for the game, but you reiterate the guidance.

So are there other parts of the portfolio which are not performing as well as expected or you want to keep some room of maneuver for the rest of the year? And secondly, on the licensing and partnership deals, can you remind us what you expect for the full year? And what's the expected phasing by quarter? And notably, were there any specific contribution during the Q1?

Nicolas. So on the -- yes, we said indeed that we're very happy with the strong start that exceeded in only 2 weeks the annual expectation that we had. It's still early in the year with 9 months ahead of us.

And we have, of course, still a number of games to come in the second half. We also have a strong competitive lineup to come this year. So it's a bit early to update the guidance. That's what I would say at this stage.

In terms of partnerships, so for the whole year, we expect a material contribution, but lower than over the last years. We had a limited contribution in Q1.

It was below EUR 10 million, probably around EUR 5 million. We factored in, as I said, a limited contribution in the second quarter. So the material contribution is expected in the second half of the year.

[Operator Instructions] And our next question today comes from the line of Aleksander Peterc from Bernstein.

I'd just like to circle back to your guidance. If Black Flag Resynced is doing so much better than you had originally expected, I'm a little bit surprised still to see the second quarter guidance coming in a fair bit below consensus.

So maybe you can just put everything together for me and perhaps the explanation is lower partnerships in the first half and that includes the second quarter. Is that the reason why? And then should we, as a result, view your full year guidance as being conservative because if Black Flag is doing much better and the rest of Ubisoft is performing in line with expectations, then I expect you have some margin on the upside to your full year guide.

Yes. So as I said, we're very happy with the start. As for the second quarter guidance, I think it clearly reflects the early success of these first 2 weeks.

Yes, in terms of comparison versus with last year's second quarter, last year, we had a meaningful impact of partnerships, while we have a limited one this quarter. So that's a big part of the explanation comparing with last year's Q2.

But I don't know what are the assumptions that were used in the consensus. For the full fiscal year, as I said, while it's really a great start, it's still early.

As we said, we will be announcing additional games to be launched in the second half on top of the Rayman Legends Retold remake already announced.

And we expect also a strong competitive lineup. So it's a bit early to update the guidance. For you to know, we also had EUR 15 million net bookings per shipment in the first quarter to keep in mind when you analyze the second quarter guidance.

That's very clear. Can I just have a very quick follow-up? Is there any chance that your Rayman remake will be as successful as the Black Flag one? Or is it a totally different animal?

Yes. I would say that, first of all, of course, Assassin's Creed is a very, very big brand, so you need to take into consideration the relative size of the brand, but Rayman Legends is really an iconic game.

So it's the same spirit in the way we consider Rayman Legends and Assassin's Creed Black Flag relative to, in both cases, iconic original games.

And as for AC, we are coming with a revamped experience, an improved experience while sticking to the original DNA of Rayman, but with additional gameplay features, a broader scope and a full revamp in 3D.

So what we've seen from hands-on coverage today is really encouraging.

So we believe that, yes, a long-time fans will be very happy to rediscover that improved version of the original experience, and we should be attracting a whole new generation of players.

And the next question today comes from the line of Doug Creutz from TD Cowen.

Sony recently announced that they're going to discontinue physical disk-based games as of 2028.

Just wondering from your perspective, if you have any concerns that could create a demand headwind either directly or perhaps indirectly because it prevents gamers from recycling games to the used game market and then using that to purchase new games.

What we saw on the PC is that it helped to grow the market. There's also some pressure for the future on the cost of machines and being able to be only digital will help to have a more accessible machine, I would say.

So as you said, there are plus and minus. but we think it will not disturb too much the industry.

Thank you. There are currently no further questions. I will hand the call back to you, Yves, for any final remarks.

Okay. Thank you very much for all your questions, and have a good day or good evening. Thank you.

Bye-bye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Welcome, everyone, and thank you for joining the call today. This past fiscal year was one of decisive actions for Ubisoft. We initiated one of the most ambitious transformations in the company history, building a more focused, agile and disciplined organization that is capable of consistently delivering high-quality experiences to players through a sustained release cadence while supporting value creation over time.

To achieve this strategic resets in financial year '26, we began putting in place a new operating model, rationalized our portfolio of games and executed with discipline on our cost reduction program while significantly deleveraging the group. In financial year '27, we will pursue and complete the execution of this transformation and continue investment ahead of much stronger and sustained content cycle.

This year is therefore expected to represent a low point in our free cash flow trajectory, along with a softer release slate and restructuring costs.

We will continue to grow our live games led by Rainbow Six and its strong road map, deliver Assassin's Creed Black Flag Resynced and launch other targeted premium games based on established Ubisoft brands. This 2-year transformation comes with difficult decisions and a disappointing short-term financial performance, but I firmly believe that together, these actions are better positioning Ubisoft to deliver sustainable free cash flow over time.

The expected outcome beyond financial year '27 will be an important rebound driven by a significantly stronger new release pipeline, the acceleration of our live games and the continued reduction of our fixed cost base with free cash flow turning positive in financial year '28 and reaching a robust level in financial year '29.

Overall, we expect to generate positive cumulative free cash flow through financial year '27 to financial year '29 period. In this context, with a comfortable liquidity position, the review of our financing options is actively progressing with the objective of executing the most efficient financing scheme in due course.

I will now let Frédérick detail our financial performance this year.

Thank you, Yves, and hello, everybody. Overall, full year net bookings for the year stood at EUR 1.525 billion, down 17% year-on-year, primarily reflecting a softer new release schedule. Back catalog was robust this year, broadly stable year-on-year, highlighting once again the strength and attractiveness of the group's portfolio of franchises. The group reached 36 million MAUs and 129 million unique users across console and PC, stable when excluding XDefiant from the base. In Q4, net bookings stood at EUR 415 million, EUR 25 million above guidance, driven by better-than-expected back-catalog performances across the group's major franchises and MAUs were slightly up year-on-year.

Net bookings were down 54% year-on-year, reflecting a higher -- a high comparison base that included the release of Assassin's Creed Shadows and significantly higher partnerships. For its part, back catalog net bookings stood at EUR 243 million this quarter, down mid-single-digit, excluding partnerships. Rainbow Six Siege delivered a solid quarter with activity and engagement trends significantly improving sequentially. Session days remained stable year-on-year while peak DAUs in March increased year-on-year and nearly 3x higher than in early November, reaching the second highest level since March 2020. MAUs were clearly above 10 million in March and up double digits year-on-year, reflecting a meaningful reengagement of the player base and closing the year with an annual audience growing low double digits and above 30 million unique active players.

The Year 11 has been praised by players, showcasing significant community-driven content for the year ahead and reflecting the team's sustained effort to address player feedback over the recent months.

The Division 2 saw net bookings outperform in the quarter, and more than double year-on-year this fiscal year, supported by the 10-year anniversary of the franchise, roadmap updates and continued strong live services execution. The anniversary season and the limited time Realism mode drove meaningful player engagement growth and led to a record quarter in terms of monetization for the game thanks to audience growth as well as structural improvement in terms of retention and conversion. The performance highlights the team's continued focus on evolving the player experience over time.

The Assassin's Creed franchise also posted a strong performance this quarter, outperforming and delivering year-on-year engagement growth, closing the year with an annual audience above 30 million unique active players.

Avatar: Frontiers of Pandora continued to benefit from momentum generated by the third-person update, the latest expansion and the theatrical release of the Avatar film in the prior quarter, delivering very strong year-on-year net booking growth, both in the quarter and over the fiscal year.

The Crew Motorfest reached record quarterly users on the back of a robust content pipeline, including the NASCAR-themed season and the release of Trackforge, a new UGC feature enabling players to build their own racing circuits.

For Honor saw net bookings grow double-digit this quarter, supported by the launch of Year 10, Cycle of War that led to solid audience and engagement growth. The new seasonal content roadmap, gameplay updates and anniversary celebrations highlighted the franchise's long-term durability and reflected the team's continued live execution nearly 10 years after release.

Total digital net bookings and PRI stood at EUR 390 million and EUR 301 million, respectively, both down year-on-year, reflecting a strong comparison base linked to the release of Assassin's Creed Shadows in March last year and a higher level of partnerships. Mobile stood at EUR 29 million, up mid-single digit year-on-year, excluding partnerships. The quarter saw the release of Rainbow Six Mobile and The Division Resurgence.

Both games were welcomed by players for their faithful gameplay experiences. And while the game had a slow start, the teams are working towards broadening their respective audiences.

This quarter, Invincible: Guarding the Globe benefited from the release of the new TV series, driving a significant uplift in player activity throughout March and reaching record activity levels in early fiscal '27. Overall, its net bookings were up over 50% this fiscal year.

Stepping back and as mentioned previously, this fiscal year has been marked by a major organizational portfolio and financial reset. These deliberate choices result in short-term painful, but necessary financial outcomes both in fiscal year '26 and fiscal '27 ahead of a significant rebound expected in fiscal '28 and fiscal '29.

Starting with fiscal '26, you will find our non-IFRS P&L on Slide 6 of our presentation. Gross margin was stable year-on-year. R&D this year reflected the EUR 650 million accelerated depreciation we announced in January linked to the transformation-related decisions we took across our portfolio of games. It also reflects incremental depreciation, notably linked to the decision not to discontinue the development of a game based on the new IP that has been announced as delayed in our January communication.

I will provide more details on the R&D topic on the following slide. SG&A was down 13%, mainly reflecting lower variable marketing expenses due to a softer new release slate this year. As a result, non-IFRS EBIT stood at EUR 1.040 billion, broadly in line with our objective of around EUR 1 billion. You can refer to our press release or presentation appendix for the full IFRS to non-IFRS reconciliation.

Turning now to Slide 7. P&L R&D stood at EUR 1.086 billion this year -- EUR 1.086 billion, up significantly year-on-year, reflecting the accelerated depreciation we announced in January linked to the strategic decisions to refocus our portfolio and revise our roadmap in order to ensure enhanced quality benchmarks are fully met.

For its part, total cash R&D was down EUR 151 million or 12% year-on-year, reflecting our continued efforts addressing our fixed cost base and the refocused roadmap. This year's reduction is in capitalized investments that will flow through the P&L over the coming years amounted to EUR 156 million.

Looking at our cash flow statement on Slide 8, free cash flow consumption stood at EUR 443 million, in line with our updated target range of between EUR 400 million and EUR 500 million. The free cash flow consumption reflects the softer release slate, which resulted in lower gross profit generation, while we continue investing ahead of a significantly stronger content pipeline in fiscal year '28 and fiscal year '29.

Turning to the balance sheet. Non-IFRS net debt improved materially to EUR 187 million at end March 2026 compared to -- compared with EUR 885 million a year earlier, reflecting the cash inflows of the investments into Vantage Studios. Cash and cash equivalents remained at a comfortable level of around EUR 1.35 billion.

Let me now turn to an update on the group transformation. Following the comprehensive transformation we announced in January, a reset centered on a new operating model, a refocused portfolio and right-sized organization, Ubisoft is now firmly in the execution phase with tangible progress across all pillars. A key milestone with the creation of Vantage Studios alongside the closing of the EUR 1.16 billion Tencent transaction, strengthening our balance sheet and enhancing our financial flexibility to support the group's transformation.

From an organizational standpoint, the recently appointed co-CEOs of Vantage Studios established a new dedicated leadership team for the Assassin's Creed franchise, bringing clear mandates and creative accountability to our most iconic brands. We also appointed Nicolo Laurent as a strategic adviser, bringing extensive experience building and operating globally successful competitive and live games, further strengthening Vantage Studios capabilities in this strategic segment.

At the same time, we are rolling out our new structure, with key leadership appointments across Creative Houses 3 and 5 and the Creative Network, while finalizing the leadership team for Creative House 2.

Julien Bares appointed as General Manager of Creative Houses 3 and 5 brings more than 25 years of extensive experience in the video game industry in leadership roles across AAA production and live operations, including more than 20 years in China.

In a selective market environment, this new operating model has gone hand-in-hand with stricter portfolio discipline. We have discontinued 7 projects and delayed 6 others, reflecting elevated quality criteria and a refocus on the opportunities with the highest potential.

This discipline is already translating into higher quality standards as reflected in recent releases such as Assassin's Creed Shadows, Anno 117: Pax Romana and the Avatar: Frontiers of Pandora expansion, each achieving Metacritic scores above 80.

Finally, we are leveraging AI to enhance the player experience and boost creativity and efficiency across our teams. We are accelerating investment behind Teammates, our first label generative AI experience to enrich player experiences as well as making tangible progress organically on applications to help manage the growing complexity of modern game development pipelines. This includes building more intelligent tools supporting quality control as well as smart NPCs and more active game worlds.

By combining decades of expertise in open worlds and systemic gameplay with the pioneering work of our La Forge R&D teams, we are confident in our ability to remain at the forefront of this transformation and provide our teams with tools to enhance their creativity.

We've also made good progress on our cost reduction program and the rightsizing of the organization, which remains a key priority for us. We have completed the second phase of our cost reduction program one year ahead of the initial schedule and the growth targets, highlighting continued discipline and strong execution.

Total headcount stood at 16,590 at the end of March 2026, down by around 1,200 employees versus last year while maintaining voluntary attrition close to our record low levels, particularly among senior profiles and strengthening the talent base, thanks to the return of 155 former Ubisoft top talents.

Our fixed cost base has been reduced by EUR 118 million versus last year or 8% at current foreign exchange rates, including a favorable EUR 39 million currency impact. Overall, the fiscal '26 fixed cost base stood at around EUR 1.435 billion. We accumulated fixed cost savings since fiscal '23 of nearly EUR 325 million.

Looking ahead, we have a clear path to completing the third and final phase of our cost reduction program, targeting a fixed cost base of EUR 1.25 billion on a run rate basis by March 2028, supported by continued discipline in recruitment and targeted restructuring. We also continue to consider potential asset divestitures.

Now let's have a look at fiscal year '27 and beyond. Our lineup for fiscal '27 is light and reflects our strategic decisions that Yves detailed earlier impacting our release slate. We will launch Assassin's Creed Black Flag Resynced and other targeted premium games as well as continue to grow our live services.

Assassin's Creed Black Flag Resynced, a faithful remake of Assassin's Creed IV Black Flag that was originally released in 2013, is led by Ubisoft Singapore and scheduled for release on July 9, 2026. Rebuilt from the ground up using the latest version of the Anvil engine, the game introduces substantial visual enhancements alongside enriched gameplay systems, including updated combat, stealth, parkour, naval mechanics and narrative content.

The reveal generated strong engagement across the Assassin's Creed community, with players praising the game's modernized presentation and expanded gameplay features while recognizing its faithfulness to the original experience. We are encouraged by the early preorder momentum that has been particularly strong notably in China, ranking among the franchise's best performances over the first three weeks with the collector edition sold out and a very high share of premium SKUs.

The fiscal year will benefit from continued investment across our live services portfolio. Rainbow Six Siege is expected to return to solid net bookings growth thanks to an ambitious, community-driven content roadmap for its Year 11, with the release of numerous highly anticipated features, including Ranked 3.0 and Meta-driven gameplay that brings freshness to the experience.

The Salt Lake City Major last week further underscored the game's competitive appeal, setting a new record for a Major event viewership. The Division 2 will also continue to expand through its Year 8 roadmap, featuring 4 seasonal updates, a new DLC set in New York and additional content for players as well as introduce The Division 2 Survivors, a new game experience.

Lastly, I would like to mention the opening of Heroes of Might and Magic: Olden Era last month in early access on PC, marking the return of the long-running franchise for a modernized strategy RPG experience. The title developed by Unfrozen and published by Hooded Horse generated very positive community engagement and achieved 88% positive user ratings on Steam to date, demonstrating the strength of the Might and Magic brand. This also illustrates our capacity to leverage and monetize the strength of our IP portfolio across multiple genres and audiences, both directly or through partners.

As we marked the 30-year anniversary of the brand, the highly promising early results of Heroes of Might and Magic: Olden Era reflect and reinforce a broader renewed ambition for the franchise and its community. In this context, we expect the following fiscal '27 outlook. Net bookings down by a single-digit percentage, driven by lower partnerships, a high single-digit negative non-IFRS operating margin and free cash flow consumption of no more than EUR 500 million.

The negative non-IFRS EBIT and free cash flow consumption expected this year reflect the ongoing transformation we're currently going through ahead of a strong cash-generative growth cycle. For Q1, we expect net bookings to stand at approximately EUR 250 million, reflecting the fact that we don't have any significant new release this quarter.

Beyond fiscal '27, we expect a much larger and diversified pipeline of content to come over fiscal '28 and fiscal '29, supported by releases across our major brands, including Assassin's Creed, Far Cry and Ghost Recon supported by the stronger release schedule as well as an acceleration of our live services driven by Rainbow Six Siege, our refocused portfolio and the continued reduction of our fixed cost base, we expect an important rebound with a return to positive free cash flow generation and non-IFRS EBIT in fiscal year '28, robust free cash flow in fiscal year '29 and positive cumulative free cash flow during the fiscal '27 to fiscal '29 period.

To conclude, here are a few fiscal '27 housekeeping items for modeling purposes. The stock-based compensation is expected at around EUR 25 million, a significant decrease versus last year, reflecting the current share price. The non-IFRS net financial charge, excluding foreign exchange impact, is expected at around EUR 38 million.

Assuming full exercise of the 2028 convertible bond put options, the interest savings from the 2025 repayments are absorbed by the convertible bond redemption premium and lower financial income expected for the year. The non-IFRS tax rate is not relevant in the context of breakeven non-IFRS operating income. And the number of diluted shares is expected at around 133 million reflecting the fact that with an expected negative net income, the dilutive nature of our instruments no longer kicks in. I will now hand the call over to Yves for the concluding remarks.

Thank you, Frédérick. What makes me confident in the success of this transformation is the very high quality of the leadership that we are putting in place across the whole organization along with a reinforced and streamlined talent base. Our ambition remains clear, reinforce Ubisoft's position as one of the industry leading creator of high-quality, memorable and engaging entertainment experiences that resonate with players over the long term by combining creative focus, the latest innovative technologies, reinforced talent base and a commitment to enhance quality. We believe we have the assets and brands to return to profitable growth, robust free cash flow generation and a strengthened capital structure. We are now ready to take your questions.

[Operator Instructions]

Our first question comes from the line of Nick Dempsey from Barclays.

I've got a few. So first of all, on your planned debt refinancing, can you give us a bit more color about the kinds of partners that you might look to work with on this or anything else that can give the market some reassurance that a solution here is imminent? Is it fair to say that you need to come out with a solution in the next couple of months for this to all work?

Second question, in terms of your plan to have positive cumulative free cash flow across FY '27, FY '28 and FY '29 with only positive free cash flow in FY '28, I'm guessing that looks like you need at least EUR 400 million of positive free cash flow in FY '29, which I think would be the highest in your history. Do you plan to have a particularly strong release schedule in that year? Or how often could you get to that kind of level? And last question, can you tell us roughly how much the cash restructuring charges that you're expecting to book in FY '27 now?

Thank you, Nick. So on the refinancing, our process review is actively progressing. We are considering several different options with the objective to optimize our cost of capital. Today, we have sufficient liquidity to address the near-term maturity using cash on hand is needed. And we enjoy comfortable cash and cash equivalent position of above EUR 1.3 billion. So that provides us with the flexibility to evaluate the most efficient financing solution for the medium to longer term. And we will update the market in due time.

In terms of the outlook for free cash flows across fiscal '28 and fiscal '29, yes, we expect positive in fiscal '28 and really robust free cash flow in fiscal '29 on the back of a very strong pipeline of products across the 2 years, the recent portfolio review that we conducted, it gave us an even stronger level of visibility for a very rich pipeline, including our major franchises and notably Assassin's Creed, Far Cry and Ghost Recon on top of a very strong roadmap from Rainbow Six Siege among other items. So yes, the perspective is very positive for fiscal '28 and even more so in fiscal year '29.

In terms of the restructuring costs, if you think about the 2-year cost reduction program was nearly around EUR 118 million. You should consider that the restructuring costs to between 50% to 60% of that amount, and we expect the majority of this coming in fiscal '27.

And our next question today comes from the line of Nicolas Langlet from BNP Paribas.

I've got three questions. The first one on the full year '27 net booking guidance. So what's the year-on-year impact coming from the lower licensing and partnership deals? Or the other way, if you exclude those partnership licensing deals, what would be the expected net booking for full year '27? Secondly, on Assassin's Creed Resynced. Curious what your internal expectation relative to other Assassin's Creed titles. You think the total booking performance during the first year to be comparable to [indiscernible] or it could actually approach a full scale [indiscernible]. And finally, on the debt repayments, you mentioned the [ soft ] 70 million convertible bond. Can you remind us if there are other repayment both in full year '27 and full year '28?

So in fiscal '27, yes, the reduction in overall net bookings is driven by our partnerships. So excluding partnerships, you can consider we'll be growing. In terms of Assassin's Creed Resynced, as I said, we are very happy with the preorders momentum that ranks among the best titles in the franchise for the first 3 weeks. Of course, there is still 7 weeks to go. So we'll see how the momentum will continue building up, but we are happy and confident that it will be a really successful Assassin's Creed title because it's faithful to the experience, but it also comes with many improvements to the original experience that players have liked when they've seen the first showcase of the game.

In terms -- now keeping in mind that it's not a full price type of game. Now in terms of debt repayments, so we have in fiscal '27 -- in 2027, we expect a maturity of slightly below EUR 700 million. So that will come after the maturity coming this year in 2026 or slightly below EUR 500 million if the convertible bond put is exercised. And then in fiscal year '29 if the second adoption of the convertible bond is exercised, that would be another EUR 500 million. So calendar year 2029 to be precise.

Okay, okay. And last question. On the Vantage Studio minority interest, are you able to quantify what we should expect in full year '27? And can you confirm that there will be a minority line related to Vantage Studio in full year '27?

Can we confirm there will be what, sorry, Nicolas?

Minority interest line related to Vantage Studio?

Yes. Yes. There will be, of course.

Can you guide on the magnitude of the potential minority interest?

No, we don't guide on this for now.

And our next question today comes from the line of Doug Creutz from TD Cowen.

I was wondering if you could just talk a bit more about your experience with Rainbow Six Mobile and The Division Resurgence to date, how they're doing relative to your expectations? Do you expect them to be meaningful contributors to revenue in fiscal '27? And how has your experience sort of shaped how you're thinking about your investments in mobile going forward?

Yes. Thank you, Doug. So what we've seen with both launches is that they've been very well received by the players with high community sentiment, praising the quality of the game-play and the faithfulness to the original experience. We can qualify at the start as being slower than expected in both cases. But we see that there are a number of good features that we can bring to those games to progressively grow the audience and performance for fiscal '27, we remain cautious on the forecast for both games until we can see more meaningful growth.

Thank you. This concludes the Q&A session for today. I will now hand back to you for closing remarks.

Thank you very much for your questions, and have a good evening.

Good day, and thank you for standing by. Welcome to the Ubisoft Q3 Fiscal Year 2026 Sales Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Yves Guillemot, Ubisoft's Co-Founder and Chief Executive Officer. Please go ahead.

Welcome, everyone, and thank you for joining the call today. We delivered a solid third quarter performance with net bookings growing at a double-digit rate year-on-year, exceeding our expectations. This performance reflects the strength of our portfolio and the breadth of our player engagement across our core franchises, supported by recent releases and live content updates that continue to resonate with players.

In parallel, we are making progress on the transformation announced last month. The allocation of studios and capabilities across the creative houses and network has now been announced and key leadership appointments are ongoing, including external hires of experienced respected industry veterans. This transformation is designed to sharpen focus, accelerate decision-making and elevate our creative ambition in an increasingly selective market. Vantage Studios has been operating since October, and we are preparing for the rest of this new operating model to start running in early April.

As we move into this execution phase, our financial position and available cash provides the flexibility needed to address this near-term maturity. While we continue to work on extending our debt profile. This allows us to remain focused on delivering the transformation and creating the conditions for our creative houses to fully deliver on the significant pipeline of exceptional high-quality games we will have within the next 3 years. Importantly, this transformation is supported by the strongly improved retention and reinforced talent pool, thanks to the return of numerous skilled former Ubisoft employees in our studios over the recent years.

Now I will transfer the call to Fr�d�rick.

Thank you, Yves, and hello, everybody. Over the first 9 months of the year, net bookings stood at EUR 1.1 billion, up 18% year-on-year, driven by the strength of our catalog of brands. Assassin's Creed and The Division both delivered nearly double net bookings over the period, while Anno posted a fourfold increase in net bookings and Avatar grew by around 20%. These 4 brands were also key drivers of the 12% year-on-year growth over Q3.

In terms of activity metrics, the group's brands attracted around 130 million unique active users across console and PC in calendar year 2025, highlighting the appeal and strength of our portfolio of franchises. MAUs in Q3 reached 34 million, stable year-on-year, with activity metrics improving throughout the quarter. In December, MAUs were up 3% year-on-year. Our Q3 net bookings reached EUR 338 million, 11% above guidance. This overperformance was primarily driven by partnerships and the Assassin's Creed franchise.

On the new release side, Anno 117: Pax Romana developed by our main studio had a solid start with an 84 Metacritic and net bookings outpacing those of Anno 1800 on a comparable time frame. The game has been well received by players and critics supported by its unique take on the iconic Roman setting and new gameplay features such as the skill tree. Looking ahead, while Anno 1800 continues to be a strong seller, Anno 117: Pax Romana will build on its post launch roadmap with the first DLC, Prophecies of ASH scheduled to release in April and introducing a large new island to discover.

On the back-catalog side, net bookings reached EUR 297 million, up 11% year-over-year. Avatar: Frontiers of Pandora posted a solid performance this quarter, benefiting from the release of the high quality From the Ashes expansion, developed in our Massive studio that launched alongside the Avatar: Fire and Ash movie. This content with an 81 Metacritic score supported growth in player engagement with session days nearly doubling year-on-year as well as growth in player acquisition and monetization. Performance was further underpinned by targeted gameplay enhancement, including the highly anticipated introduction of a third-person view, broadening the player experience and positioning the game as a long-term seller.

This quarter's competitive first-person shooter market was particularly crowded. In this context, Tom Clancy's Rainbow Six Siege performed in line with expectations. The title saw improving activity and engagement trends in December with MAUs up year-on-year and DAUs back on a positive momentum. By early January, DAUs were more than double where they stood early November, supported by the progress in addressing player feedback related to balancing and cheating. The Assassin's Creed brand overperformed this quarter and saw solid activity metrics with session days up 7% quarter-on-quarter and 28% year-on-year.

Overall, the brand saw double-digit year-on-year growth in active users, underlining the strength and durability of the franchise. The quarter notably saw the release of Assassin's Creed Shadows on Switch 2, enabling the title to broaden its audience as well as the high-quality value of memory update for Assassin's Creed Mirage. The Division to continue to grow meaningfully across active players, engagement and revenue. This performance was driven by a strong slate of live events and the launch of a new season in December. Total digital net bookings reached EUR 256 million, stable year-on-year and represented 76% of our total net bookings. PRI stood at EUR 148 million, up 3% year-on-year and represented 44% of our total net bookings. Mobile amounted to EUR 25 million, down versus last year.

Now turning to the group's transformation and bidding on what Yves just mentioned, we have made good progress over the past few weeks. We have provided the breakdown of studios by Creative Houses and Network that is detailed in today's press release. Additionally, as we prepare for this new organization to start operating in April, appointments of Creative Houses key leadership will start in March and include industry veterans with a proven track record. In line with our ambition to reshape the HQ into a leaner and focused organization, consultations with employee representatives has initiated regarding the objective to reduce headcount at Ubisoft headquarters in France by 200 positions through a voluntary departure plan. These measures are intended to support a more agile organization and reinforce our ability to deliver sustainable and profitable growth.

Let me turn to a few key highlights from the quarter. First, as you know, we completed the transaction with Tencent, securing EUR 1.16 billion cash investment. The proceeds from the transaction has strengthened our balance sheet and provide increased financial flexibility to support the acceleration of our transformation while being fully available to address upcoming debt maturities. Second, in November, we unveiled Teammates, our first label player-facing generative AI experience. Building on the Neo NPC initiative, the prototype explores new forms of adaptive gameplay, with AI-driven characters capable of understanding and reacting to players in real time. The experience also serves as a testbed for the underlying technology, reinforcing our long-term strategy to enhance interactivity and creative tools for development teams. The announcement received positive media coverage, with DigitalTrends describing it as "Ubisoft's AI experiments that could be gaming's biggest leap in decades".

Third, in December, we acquired the rights to March of Giants from Amazon for a nominal amount. Following a successful closed alpha, this acquisition enables us to enter in the MOBA genre, one of the biggest and most engagement segments of the industry, with a game that is fully aligned with our Game-as-a-Service native pillar of our strategy. The March of Giants team led by veteran developers of Ubisoft that created Rainbow Six Siege brings proven expertise in building and operating globally successful competitive and live games, strengthening our internal capabilities in this segment.

And fourth, in January, we announced the appointment of Valentine Piedelievre-Eman as Chief Communication Officer. She brings extensive experience across entertainment and technology in the international organization, including most recently at Warner Bros. Discovery.

Finally, turning to the outlook. We have confirmed today our fiscal '26 guidance. We expect net bookings of around EUR 1.5 million, non-IFRS EBIT of around minus EUR 1 billion, free cash flow of between minus EUR 400 million and minus EUR 500 million, non-IFRS net debt of between EUR 150 million and EUR 250 million. This translates into an expected consolidated cash and cash equivalents position at end March 2026 of between EUR 1.25 billion and EUR 1.35 billion that is fully available to service our debt maturities. Our liquidity position provides flexibility to address the near-term maturity using cash on hand, and we are actively exploring several options to extend our debt maturity profile.

The lineup for Q4 includes Rainbow Six Mobile and The Division Resurgence. Rainbow Six Mobile developed by the Montr�al studio that created Rainbow Six Siege, brings the that Siege experience to mobile, combining tactical depths with fast-paced action while integrating gameplay features specifically designed for mobile users. The title that will expand the brand's audience has generated strong early momentum, with more than 18 million pre-registrations to date. Following a successful soft launch in LatAm, Canada, France and Poland, Rainbow Six Mobile is scheduled for worldwide release on February 23, with a strong content roadmap, including recurring challenges, limited-time playlists and events as well as the monthly release of a new season, supporting sustained player engagement.

Following a solid Q3, Rainbow Six Siege saw MAUs grow mid-single digit in January. The game will also benefit from the Six Invitational that is taking place in Paris this week, where the franchise will present the Year 11 roadmap, highlighting increased investments in player protection and the delivery of community-driven content to support sustained engagement and growth. The Division Resurgence developed by Ubisoft Mobile Games in Paris was confirmed as a faithful mobile adaptation of the long-running and successful Division franchise following the latest series of live test in Q3. The game is planned to release in Q4, and we'll be taking part in the franchise's 10th anniversary celebrations in March, but we also featured the launch of a new game mode in The Division 2 alongside the reveal of an ambitious roadmap for the coming year.

And as always, here are a few fiscal '26 housekeeping items for modeling purposes. The stock-based compensation is expected at around EUR 32 million, unchanged versus prior guidance. The non-IFRS net financial charge is expected at around EUR 45 million, unchanged versus prior guidance, reflecting the full year effect of last year's additional financing. The non-IFRS tax rate is not relevant in the context of negative non-IFRS operating income and the number of diluted shares is expected at around EUR 132 million, reflecting the fact that with an expected negative net income, the dilutive nature of our instrument no longer kicks in, also in change versus prior guidance.

We are now ready to take your questions.

[Operator Instructions] And our first question today comes from the line of Nicolas Langlet from BNP Paribas.

I've got 3 questions. First, on the licensing deals. So you mentioned part of the overperformance related to the licensing deal. So what would have been the growth in Q3 if you exclude the licensing deals? And if you want to share any details about those deals, that would be appreciated. Secondly, on Assassin's Creed Shadows, can you share the performance of the Titan life to date compared to the previous large-scale Assassin's Creed? And if you can share any feedback regarding the performance on Switch 2, that would be great.

And finally, on your cash position, what do you consider as the minimum vital gross cash position to run the business? And still on that topic, of the EUR 1.3 billion gross cash you expect at the end of the year, how much is part of Vantage Studio? And how much is part of the rest of Ubisoft? And how easy it is for you to use Vantage cash position for the rest of the business, if needed?

Thank you, Nicolas. So on your first question, the Q3 would have been slightly down without licensing deals. On Assassin's Creed Shadows, so overall, what we shared is that the brand is strongly benefiting from Shadows launch as we nearly doubled net bookings on the overall franchise over the first 9 months of the year and still strongly growing in Q3 with activity metrics up quarter-on-quarter. So we see that the brand is in good shape. And yes, the Switch 2 contributed to broadening the audience and to the performance in the third quarter. We've been happy to see that Assassin's Creed overperformed expectations in the last quarter.

So that confirms that we've been clearly improving the game's quality delivery we shadows this year, and that is paying off. In terms of the minimum cash position, if we look at the usual working capital variations throughout the year, we can consider that a few hundred million euros is the minimum cash position to run the business. And to your question on cash availability, the full -- as I said, the EUR 1.25 billion to EUR 1.35 billion consolidated gross cash is fully available to service debt maturities, and that includes the Vantage Studio liquidity that is also unrestricted through cash pooling to service debt maturity.

And to complete the answer, we have already upstreamed nearly EUR 700 million from Vantage Studio. So the rest being fully available through cash pooling.

We will now go to our next question. And the next question comes from the line of Ben Shelley from UBS.

My first one is you still have EUR 100 million of variance in your free cash flow and balance sheet guide for FY '26. Could you talk about what's driving that? And then could you also talk about will the revenues that were postponed by the restructuring be delivered in FY '27? And then my last question is, can you expand a bit further on your opening remarks where you say you continue to work on extending your debt profile? And can you outline what options you are considering?

Thank you, Ben. So on the first question, yes, the EUR 100 million variation in free cash flow guidance reflects a potential variation in working capital , and that can include potential cash in of a partnership. On your second question, you said revenues postponed by restructuring. I'm not sure I understand your question. Can you repeat the second question?

Yes. Will the revenues that were postponed by the restructuring and be delivered in FY '27, given they're not coming in FY '26?

So as part of what we did recently decided, there is one unannounced game that is postponed from fiscal '26 to fiscal '27. So that will be seen in fiscal '27. We, however, canceled a game this quarter. So we won't see that happening in fiscal '27. And in terms of the partnerships, as we said, we stopped negotiations on partnerships. And of course, we will have the leadership of the Creative Houses taking care of these future partnerships. But we have nothing more to announce in terms of timing or reasons for the conclusion of this partnership negotiations.

On the -- in terms of refinancing, as I said, yes, we have clearly sufficient liquidity with cash on hand to address our near-term maturity and that gives us the flexibility to assess the most efficient refinancing options, indeed, to push our debt maturity for the medium- to longer-term maturities, but we have nothing more to precise at this stage.

[Operator Instructions] And our next question today comes from the line of Doug Creutz from TD Cowen.

If I look at your guidance for the year of about $1 billion (sic) [ EUR 1 billion ] loss, that implies also you're going to lose about $1 billion (sic) [ EUR 1 billion ] in the second half. That includes the EUR 650 million from the accelerated depreciation. But if I back that out, that still implies you're going to lose EUR 350 million on low EUR 700 million revenue. In the first half of the year, you were slightly profitable on high EUR 700 million revenue, which seems like that there's a big acceleration in costs embedded in there aside from the accelerated depreciation. So could you just walk through where that acceleration in cost run rate is in the second half versus the first half?

So in terms of the second half EBIT, yes, most of the loss came from the accelerated depreciation, as you say. And the rest comes from the fact that we reduced net bookings by EUR 350 million, and that comes with a EUR 330 million gross margin reduction. Apart from that, we've seen that we continue reducing our fixed cost base as we will be closing the second phase of our cost reduction program of EUR 100 million a year ahead of timing.

[Operator Instructions] I will now hand the call back to the room for closing remarks.

So thank you very much for your question, and have a good evening and a good morning for the other part of the Atlantic. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Ubisoft Strategic Update Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Yves Guillemot, Ubisoft Co-Founder and Chief Executive Officer. Please go ahead.

Good evening, everyone, and thank you for joining us on such short notice. Today, we are announcing a major organizational, operational and portfolio reset. The fundamental change designed to reclaim our creative leadership, regain agility and restore the conditions for a return to sustainable growth and robust cash generation.

This reset is built around three core pillars: first, a new operating model centered around five specialized creative houses; second, a refocused portfolio with a meaningfully revised three-year road map; and third, an acceleration of our cost reduction initiatives to rightsize the organization and improve structural efficiency.

Let me start with the context. The industry has become persistently selective, especially on the AAA side. And the shooter landscape is increasingly competitive with rising development costs and greater challenges in creating new brands. Nevertheless, when successful, exceptional AAA content has more financial potential than ever.

While the progress on our production processes translated into improved level of quality across our releases in 2025, today's environment requires that we step change how we are organized and operate with the objective of delivering exceptional game quality at more competitive costs.

At the core of this transformation are our creative houses. Integrated business units, combining production and publishing, therefore, unifying the gamer relationship. Each one is built around a clear creative genre and brand focus with full responsibility and financial ownership led by dedicated and expert leadership teams, focusing on the long-term value creation road map. It is a radical move, relying on a more decentralized creative organization with faster decision-making and best-in-class cross-functional core services, supporting and serving each creative house.

This new operating model will further empower the execution of the group strategy centered on open-world adventures and GaaS-native experiences, supported by targeted investments, deeper specialization and cutting-edge technology, including accelerated investments behind player-facing Gen AI.

To put the creative houses in the best condition to success, we decided to refocus our portfolio with a meaningfully revised three-year road map and accelerated our cost reduction initiatives to rightsize the organization. We will discontinue several projects currently in development and provide additional time to certain games in order to ensure enhanced quality and maximize long-term value. We will also selectively close several studios and continue restructuring throughout the group. While these decisions are difficult, they are necessary for us to build a more focused, efficient and sustainable organization over the long term.

Taken together, these measures mark, as you can see, a decisive turning point in Ubisoft's history and reflect our determination to confront challenges to reshape the group. The portfolio refocus will have a significant impact on the group's short-term financial trajectory, particularly in fiscal year '26 and '27. But this reset will strengthen the group and enable us to renew with sustainable growth and robust cash generation. We are entering a new phase, one designed to reclaim creative leadership and build value for players and stakeholders over the long term.

So, I will now hand over the call to Frédérick, who will walk you through today's announcements in more detail.

Thank you, Yves, and hello, everybody. Let me start with the first pillar of this reset, the new operating model. As mentioned by Yves, our new organization will be structured around five creative houses and supported by: first, a creative network bringing together studios providing development resources; second, shared core services; and three, reshaped headquarters focused on strategy, governance, performance management and capital allocation.

This new organization will start operating early April. It is designed to simplify the organization and place creative and financial accountability closer to where value is created, strengthening our ability to innovate and execute with greater discipline, flexibility and speed.

At the heart of this reset is a new and decentralized operating model structured around five creative houses. These integrated business units will feature three major changes. First, they will combine game development and go-to-market functions with a gamer-centric approach and be fully responsible for brand development, content strategy as well as editorial direction. Second, they will be shaped by distinct creative genres led by dedicated high-profile incentivized teams with a unique set of expertise in their respective genres. And third, they will have full financial ownership and account for economic performance.

Overall, they will be driven by clear objectives and guiding principles. Each creative house will be organized around a distinct creative genre and designed to concentrate deep expertise in specific types of player experiences. Each house will host dedicated studios and will be responsible for developing must-play experiences for specific audiences and engaging player communities earlier and constantly throughout the developing process.

The first creative house, Vantage Studios is focused on scaling and extending Ubisoft's largest and established franchises, Assassin's Creed, Far Cry and Rainbow Six to turn them into annual billionaire brands. The second creative house is dedicated to competitive and cooperative shooter experiences. It includes the, The Division, Ghost Recon and Splinter Cell brands. The third creative house is designed to operate a roster of select sharp live experiences. It includes the For Honor, The Crew, Riders Republic, Brawlhalla and Skull & Bones brands. The fourth creative house is dedicated to immersive fantasy world and narrative-driven universes. It includes the Anno, Might & Magic, Rayman, Prince of Persia, Beyond Good & Evil brands. And the fifth creative house is focused on reclaiming our position in casual and family-friendly games. It includes the Just Dance, Idle Miner Tycoon, Ketchapp, Hungry Shark, Invincible: Guarding the Globe, UNO and Hasbro brands.

In addition, there are four new IPs currently in development, including March of Giants. We will communicate on their respective creative home at the later stage. Each creative house will benefit from dedicated leadership that will include high-profile talent coming from the industry. They will be tasked with attracting and developing top-level specialist talent and supported by incentive schemes aligned with creative success, player engagement and long-term value creation.

Finally, fully owning the gamer relationship, each creative house will have end-to-end responsibility for its portfolio, overseeing the full creative and brand scope from development to publishing, including brand marketing and sales go-to-market strategy. They will also be financially accountable both in terms of P&L and cash generation. This will sharpen strategic focus, reinforce execution discipline and ensure that investment decision will be taken closer to where value is created.

To support these creative houses, we are setting up a streamlined organization that preserves our scale benefits while reducing complexity. This new organization will be composed of the creative network that will bring together a powerful set of studios providing best-in-class production capacity and cross-functional creative expertise serving the creative houses.

Operating within a structured project-by-project collaboration framework, the creative network studios can deliver both co-development or end-to-end mandates under the strategic direction of each creative house. It also be supported by three core services that will provide the backbone of our ecosystem and act as an enabler for the creative houses and network. They will focus on delivering scalable technology, production capabilities as well as business services across the group.

First, production services will include production standards and tools, localization, play tests, game analytics, QA and QC. Second, technology and infrastructure will include game engines, online services, Gen AI initiatives and IT infrastructure. And third, business operations and services will include media planning, execution, influencer and direct-to-player capabilities, pricing and distribution management as well as customer support.

Finally, the new organization will be underpinned by a reshaped headquarters, which will set the group's strategic priorities, ensure support for all creative houses and maintain a forward-looking view on industry trends, including technological developments and market innovations. It would notably oversee the group's talent management strategy and performance monitoring, corporate communication strategy, legal services, capital allocation framework and financing, ensuring alignment between long-term strategy, financial performance and value creation.

To support the effective implementation and operation of this new model, the group also intends to return to five days per week on site for all teams, complemented by an annual allowance of working from home days. This evolution is intended to strengthen collaboration, including constant knowledge sharing and the collective dynamics across teams. We strongly believe in-person collaboration is a key enabler of collective efficiency, creative VT and success in a persistently selective AAA market.

Moving on to the second pillar of our reset is a significantly refocused portfolio and a meaningfully revised road map. In the context of a persistently more selective market, but also more rewarding as illustrated by the last quarter and as part of the finalization of the group's new operating model, we have conducted a thorough review of our content pipeline over December and January. This has led to the strategic decision to refocus our portfolio, reallocate resources and comprehensively revise our road map over the next three years. This will support our objective to return to exceptional levels of quality on the Open World Adventure segment and step change the group's position in the gas native Experiences segment, as illustrated by the recently acquired project March of Giants.

The reshape portfolio is designed to best position the creative houses for success, and this has led to two sets of actions. First, we have discontinued six games that do not meet the new enhanced quality expectations under a more selective portfolio approach. These are Prince of Persia, The Sands of Time remake, as well as four unannounced titles, including three new IPs and a mobile title.

Second, we have allocated additional development time to seven games in order to ensure enhanced quality benchmarks are fully met and maximize long-term value creation. This includes the unannounced title initially planned for fiscal '26 that has been delayed to fiscal year '27. Our objective is to ensure that every major project we bring to market has the right conditions, the right quality benchmarks and the right path to long-term value creation.

Finally, the third pillar of our reset is the acceleration of our cost reduction initiatives and the rightsizing of our organization to improve structural efficiency, restoring a much higher level of organizational agility and aligning our cost base with our strategic and creative priorities. This includes focusing resources on core value-creating activities, notably through further restructurings and strict hiring discipline across all functions. We will also continue to consider potential asset divestitures.

As part of our efforts to streamline operations and adapt to evolving market conditions, we have already taken decisive actions in the recent months to adjust our studio footprint. This includes the closure of the Halifax mobile studio announced earlier this month and the Stockholm studio as well as restructurings at Abu Dhabi, RedLynx and Massive.

The current cost reduction program of at least EUR 100 million in fixed cost savings versus fiscal year '25 is now targeted to be fully achieved by March 2026, one year ahead of the initial target. Building on this momentum, we are defining the third and final phase of our cost reduction program by setting a new objective to reduce our fixed cost base by an additional EUR 200 million over the next two years, bringing total fixed cost reductions in fiscal year '23 to around EUR 0.5 billion. This is expected to bring total fixed cost to approximately EUR 1.25 billion on a run rate basis by March 2028 compared to EUR 1.75 billion in fiscal year '23.

To conclude, I'll cover the financial impacts of this decision we've just described. First, the previously communicated fiscal year '27 guidance is no longer an appropriate reference, and we will update it in May 2026 during our fiscal year earnings release. Second, here are the key updated elements of our fiscal year '26 guidance. Net bookings are expected at around EUR 1.5 billion, translating into a minus EUR 330 million gross margin reduction versus the prior guidance, mainly reflecting changes to the current quarter release pipeline following the updated road map and the decision to postpone negotiation on certain partnerships in the context of our new operating model.

Non-IFRS EBIT is expected at around minus EUR 1 billion, mainly reflecting both the impact of the updated fiscal '26 net bookings that I just covered as well as the following transformation-related decisions that led to a one-off accelerated depreciation of around EUR 650 million.

First, the discontinuation of six games; and second, the allocation of additional time to seven titles with updated revenue expectations, reflecting a persistently more selective market. Also, free cash flow is expected at between minus EUR 400 million and minus EUR 500 million, and the non-IFRS net debt is expected at between EUR 150 million and EUR 250 million as of year-end fiscal year '26 with a cash and cash equivalent position of between EUR 1.25 billion and EUR 1.35 billion versus prior guidance of around EUR 1.5 billion. In addition, ahead of our Q3 sales release scheduled on February 12, we are providing an indicative net bookings figure of approximately EUR 330 million for the third quarter. primarily driven by an overperformance linked to partnerships and reflecting a robust back-catalog. The quarter notably saw the releases of Anno 117: Pax Romana and the Avatar: Frontiers of Pandora From the Ashes expansion that were appraised by players and critics alike. Further details will be provided on February 12.

I will now hand over the call to Yves for his final remarks.

Thank you, Frédérick. This major reset has meaningful near-term implications, particularly in financial year '26 and financial year '27. And we recognize this will be a significant shift for the market to absorb. However, we firmly believe that this is the right decision to reposition Ubisoft for creative leadership, sustainable growth and robust cash generation with a disciplined strategy and a simplified operating model and a refocused portfolio designed to create exceptional quality games and maximize long-term value creation.

We are now ready to take your questions.

[Operator Instructions] We'll take our first question. Your first question comes from the line of Aleksander Peterc from Bernstein.

I have a couple, if I may. So, the first one is whether your new creative house structure will translate into external financial reporting and guidance or at least Vantage Studio separately and then the other creative houses separately, so we know how they're performing both in terms of revenue and in terms of non-IFRS EBIT.

Secondly, how should we think about fiscal '27 because this major change is now happening towards the end of the current fiscal year '26. So is it fair to assume that things will get worse before they get better? So if you bottom out, it won't be before sometime '27 and maybe then an improvement in '28. Is that how we should think about that? And is this a rightsizing of the revenue base of the company as well? Or do you still plan medium term to retain your current revenue base more or less?

And then the last one, just on the return to free cash flow positive. Should we expect that to be a year plus 2 event? Or will it take longer for you to rightsize your cost base and get back to a cash-generative position?

Yes. Thank you, Alex. So, on your first question, at this stage, we don't expect and we don't plan to make such reporting. What you will have at minimum is that we will report the net income, so with the distinction between group share and minority interest.

In terms of fiscal year '27, beyond the fact that we just mentioned that we are postponing an important game to this year from '26 to '27. We can't say more. What we can say is that, of course, we'll provide the guidance in May. And everything we're doing today is to make sure that we reset the financial trajectory to sustainable growth over the next three years and for the company to be cash generating.

So it's a three-year event.

Your third question is -- can you repeat your third and fourth question, please, sorry.

One moment, please.

Can you hear me?

Yes.

The third question was basically, I think you answered it. The question was around when you plan to return to positive free cash flow. And from what I understood is this is a three-year plan to get back to that trajectory. Is that correct?

So we expect to get back to robust free cash flow over the next three years, but we'll give you more indication on the year-by-year schedule at a later stage.

Your next question comes from the line of Ben Shelley from UBS.

I think I've got three questions. One, how should investors think about your balance sheet over the coming years and cash and liquidity and debt? It would be helpful to have some commentary there.

My second question is, I just want to come back to that free cash flow question and specifically maybe into '27 and '28, how should we think about -- just almost just directionally, how should we think about sort of the free cash flow losses? Should we think about them falling into 2027 and 2028? Should we expect an improvement in free cash flow?

And then my last question is on Rainbow Six. And could you provide any commentary how that franchise has fared amid sort of an uptick in competition and new releases from your peers?

Yes. Thank you, Ben. So, yes, we benefit from a solid cash and cash equivalent position. And in terms of the way we'll proceed is we will proceed as we have been doing so far, which is that we will look at the different refinancing options that we have in front of us and choose the ones that will allow us to extend the maturity profile at the best cost possible. So that's -- we will replicate what we've been doing in the past in that area.

On the second question, I think I have already answered. Everything we're doing, which is to optimize our road map over the next three years and coming back with exceptional content quality, which we know is highly rewarded by the market. We just need to execute extremely well to optimize quality. We have big products coming over the next three years. And all the purpose of what we are doing with resizing of the cost base is to progressively get back to cash generation, and we expect to get back to robust cash flow generation within the next three years.

In terms of Rainbow Six, as we said, last quarter has been very competitive in the shooter segment. The team has done a great work to make sure that we will solve the cheating issue that we had mentioned last quarter. And we came with a strong season in December and the activity has come up as expected. Some players try competition like they usually do at the busy season, and they usually come back by Christmas, and that's what happened again this year. We are preparing for a strong Q4 as usual with the six invitation coming very soon and the unveiling of next year that will be very strong.

And if I could just come back to my question on the balance sheet. When you say you would sort of proceed as you've been doing, would that mean sort of going back to potentially looking again at traditional refinancing options and looking at financial markets? Or would it also mean potentially selling another minority stake as you have done before? Or are all options on the table and it's too soon to say anything?

Yes. We have different refinancing options that we can work in the coming year and 18 months. And we can also, as we mentioned, considering -- we continue considering the divestiture of assets.

[Operator Instructions] We will take our next question. And the question comes from the line of Doug Creutz from TD Cowen.

One of the factors you cited in bringing down your fiscal '26 revenue guide was the decision to postpone negotiations on certain partnerships. Is that just a delay that was around you having to sit down and decide what the new operating model was going to look like? Or does this reflect a more fundamental rethink of your approach to partnerships? And if so, could you talk about how you see that progressing going forward?

Yes. Thank you, Doug. So, yes, we decided to postpone negotiation on some partnerships. Partnerships, B2B partnership, as we said a number of times, is a key important way of doing business today as a complement to B2C. So it's here to stay and across different platforms and with different shapes of form.

What we said with the fact that we are postponing this negotiation is that we are starting a new organization very soon. And of course, the leadership of the creative houses will have the mandate to support the upcoming partnerships together with the group. So that's what they will pursue in our strategy. So, no fundamental shift, no fundamental change in our approach, just onboarding the new management coming with the creative houses.

We will take our next question. And the question comes from the line of Aleksander Peterc from Bernstein.

Just a quick follow-up. Just on your upcoming debt maturities. So, I see you have a '27 bond, EUR 600 million. You have an ocean maturing in '28. So, altogether, that's about EUR 1 billion. Do you expect to be in a position to roll this debt? Or do you have any other plans to refinance these maturities?

Yes. So, I think I answered already the question. We will be working -- so with this new operating model, this organization that will drive -- will work for our creative houses to perform very well with high-quality products and strong financial rewards. We will also in parallel work on the refinancing of our debt, and there are different options that are open to us, but it's too early to share them with you.

Thank you. This concludes today's question-and-answer session. I will now hand back for closing remarks.

So, thank you very much for your questions, and have a good evening or a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Ubisoft H1 Fiscal Year 2026 Earnings Webcast and Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yves Guillemot, Ubisoft Co-Founder and Chief Executive Officer. Please go ahead, sir.

Welcome, everyone, and thank you for joining us today. Before we begin, I would like to start with the reason for the delay in publishing our results. First, we have appointed a new panel of auditors that was approved at the AGM last July. Their position as part of their review of the H1 financial accounts required a restatement of our financial year '25 annual accounts that had been previously approved by our former panel of statutory auditors in May.

In this context, we required additional time to finalize our accounts for our Board of Directors to approve them. Frédérick will walk you through this point in more details later in the call. The closing of our strategic transaction with Tencent, which will see Tencent become a minority shareholder in our new subsidiary, Vantage Studios, is now imminent, as all conditions precedent have been satisfied.

This will mark a pivotal milestone in Ubisoft transformation, significantly strengthening our financial position by bringing in EUR 1.16 billion of cash, enabling the group to deleverage as planned. It will also empower Vantage Studios to accelerate the growth of our 3 flagship IPs under a dedicated leadership team.

In a highly competitive market, Ubisoft delivered net booking above guidance on the back of stronger-than-expected partnerships that underscore the appeal and reach of our brands. Our portfolio showed contrasting dynamics this quarter with softer trends for Rainbow Six Siege, reflecting a phase of evolution for the game in an intense competitive first-person shooter environment, offset by strong performances across the rest of the catalog. The Assassin's Creed franchise exceeded our expectations, confirming its positive momentum and ability to engage players over time.

The Division 2 also continued to perform strongly, benefiting from the momentum of the Battle for Brooklyn expansion, with the game's first semester already exceeding last year's annual bookings.

Additionally, the progress we've made in addressing our fixed cost base brings with it confidence that we can continue to drive structural efficiencies across the organization that together with top line growth, will contribute to ensure a return to strong cash generation in the coming years.

Vantage Studios represents a key element of the transformation of the company toward a new operating model built around creative houses. We will have finalized the design of this new organization by the end of the year. These creative houses will be autonomously efficient, focused and accountable business units, each with its own leadership, creative vision and strategic road map.

This group-wide transformation reflects our ambitions to renew how we create and operate in order to deliver great games for our players and lasting value for our partners and shareholders. The full details of this new operating model will be unveiled in January.

On the innovation side now, we are making great strides in applying GenAI to high-value use cases that bring tangible benefits to our players and teams. It's a big -- it's as big as a revolution for our industry as the shift to 3D, and we have everything to lead on this front. On the player experience side, we are continuing to make progress on groundbreaking player-facing generative AI application, building on our NEO NPC announcement in 2024.

We have already advanced from prototyping to player reality, and we are looking forward to sharing more before the end of the year. On the production side, we now have teams in all our studios and offices embracing this new technology and constantly exploring new use cases in programming, art and overall game quality.

On the transmedia side, we also, after greenlighting the Assassin's Creed live-action TV series in July, I would like to highlight the recent success of the animated Netflix series, Splinter Cell: Deathwatch that premiered on October 14, obtaining an 86 score on Rotten Tomatoes and landing the daily top 10 across more than 12 countries, including 6 consecutive days in the U.S. This strengthens our brand's long-term value ahead of the Splinter Cell's remake currently in development at the Ubisoft Toronto Studios.

Last but not least, I would like to celebrate the successful launch of Anno 117: Pax Romana that expands the city-builder genre. This level of quality, innovation and sales set the standard against which we want to measure our future releases performance in the coming years.

So I will now let Frédérick give you details on half year performance.

Thank you, Yves, and hello, everybody. H1 net bookings stood at EUR 772 million, up 20% year-on-year with 34 million MAUs and 88 million unique users across consoles and PC, slightly down year-on-year when excluding XDefiant from the base.

Turning to our second quarter. Net bookings stood at EUR 491 million, above guidance and up 39% year-on-year. The outperformance was driven by stronger-than-expected partnerships, demonstrating the power and attractiveness of our portfolio as well as a meaningful contribution from live TV and animated series. Excluding partnerships, overall back-catalog performance this quarter was robust and in line with expectations, broadly stable year-on-year, but marked by contrasted dynamics.

The Assassin's Creed franchise posted a strong performance in Q2, with both Assassin's Creed Shadows and the rest of the brand’s catalog overperforming. In the year to date Assassin's Creed has generated 211 million session days, around 35% higher than the last 2 years' average.

Shadows benefited from the launch of the New Game+ mode, which was widely anticipated by the community and introduced greater difficulty and new challenges for players. The Claws of Awaji expansion released on September 16 and contributed to re-engaging players. It was praised as a solid addition to the base game, offering new unique boss fights in a beautiful and dark atmosphere.

Looking ahead, Assassin's Creed Shadows will reach a broader audience with its launch on the Nintendo Switch 2 on December 2. Beyond Shadows, the rest of the AC back-catalog also performed strongly, highlighting the strength of the franchise.

Turning to the current quarter, we launched Valley of Memory on November 18, a free major update for Assassin's Creed Mirage, which brought new content and a fresh chapter in Basim's story set in AlUla. First feedback from the community is very positive, with player activity on Assassin's Creed Mirage doubling following the launch of the update, enabling the game to reach the 10 million player mark.

In a highly competitive first-person shooter market, Rainbow Six Siege continued to attract new players this quarter, with acquisition levels twice as high year-on-year, and sustain activity levels, with unique players stable quarter-on-quarter and up double-digit year-on-year.

Session days and playtime also increased both sequentially and year-on-year. However, as part of the evolution of Siege and its move to free access, a temporary surge in cheating has impacted activity and player spending versus expectations. With additional resources now in place and further hires planned, the team has identified the main issues and is actively addressing them with a robust plan in place.

Having focused most of this year on establishing a new foundation for the game, the team is exploring a new seasonal approach that introduces multiple updates throughout each season, focusing on the core gameplay experience and heavily engaged players.

This shift is designed to offer a steadier stream of fresh experiences with more variety keeping players engaged and supporting long-term franchise growth. The Siege community remains highly engaged and passionate about the game’s success. The development team is equally committed to working closely with players to address recent feedback, with a strong focus on anti-cheat measures and gameplay balance.

As announced at the Munich Major on November 16, starting in Season 4, the team will double the number of anti-cheat updates per week and introduce new prevention solutions. On the balancing front, the team is accelerating efforts in Season 4, with four balancing updates per season planned for Year 1, aligned with the new content cadence. To celebrate Siege’s 10-year anniversary in December, players can look forward to daily rewards and a special in-game event launching mid-December.

Elsewhere in the catalog, I would like to highlight a few notable performances. The Division 2 continued to benefit from the momentum of the Battle for Brooklyn DLC release in May, as well as regular content updates, continuing to attract new players to the game. Along with rising player numbers, player engagement is up, with a record second quarter in terms of Session Days since financial year '21. The game’s performance this semester has already exceeded last year’s annual net bookings.

Avatar: Frontiers of Pandora posted a strong performance this quarter on the back of the July third person update announcement, that was widely anticipated by the community. The game also regained momentum with the announcement of the From the Ashes expansion that will come along with the movie.

Star Wars Outlaws launched on Nintendo Switch 2 in September to strong critical and player reception. The release expanded the game’s audience and was praised for its exceptional visuals, technical optimization, smooth performance and seamless transition to Nintendo’s new hardware.

Total digital net bookings reached EUR 436 million, up 62% year-on-year and PRI stood at EUR 323 million, up 110% year-on-year. Both of these metrics benefited this quarter from tailwinds linked to partnerships. Within PRI, mobile amounted to EUR 26 million, slightly down year-on-year.

First, you will find our non-IFRS P&L on Slide 7 of our presentation. Gross margin was strongly up year-on-year by more than 3.5 percentage points, which reflects the fact that this semester saw more high-margin partnership than the first semester last year.

R&D was down year-on-year, and we come back -- I will come back to that point in the following slide. SG&A was down 16%, reflecting lower variable marketing expenses due to the absence of major releases this semester, while last year's first half saw the release of Star Wars Outlaws and XDefiant Overall non-IFRS EBIT came back to the positive zone at EUR 27 million this semester, which marks a strong improvement to last year's EUR 250 million loss. Please refer to our press release or presentation appendix for the full IFRS to non-IFRS reconciliation.

Turning now to Slide 8. P&L R&D was down year-on-year and mainly reflects lower depreciation of in-house software-related productions coming from the absence of new AAA releases this semester compared with accelerated depreciation for Star Wars Outlaws and XDefiant last year.

For its part, total cash R&D was down 11% or EUR 70 million and reflects our continued efforts addressing our fixed cost base. Looking at cash flow statement on Slide 9. Free cash flow stood at minus EUR 251 million compared with a negative EUR 126 million the previous year.

This free cash flow consumption mostly reflects the following impacts. On the one hand, a negative EUR 139 million cash flow from operations, reflecting the fact that we had no new releases this semester, which was half the outflow of last year, again, illustrating a strong improvement versus the year before.

And on the other hand, a negative EUR 102 million change in working capital requirements, notably driven by trade payables decrease comparing with a significant higher gain in receivables last year, which mainly reflects cash in from Q4 fiscal year '24 partnerships. Non-IFRS net debt stood at EUR 1.15 billion, slightly up versus last year, and cash and cash equivalents amounted to EUR 668 million, down EUR 265 million versus last year, mostly driven by the reimbursement of around EUR 245 million in debt. The -- sorry, the EUR 1.16 billion cash injection from the Tencent transaction will deleverage the group and strengthen its balance sheet.

I would now like to provide an update on the continuous progress we have been making on the group's transformation. First, all conditions precedent of the transaction with Tencent have been satisfied, enabling the sale of a minority stake in our new subsidiary, Vantage Studios to Tencent to close in the coming days.

This marks a major milestone in our transformation journey. The proceeds of this transaction will deleverage the group on a consolidated non-IFRS net debt basis while providing enhanced financial flexibility to support our strategic transformation. A new leadership team is being formed around Vantage Studios, including heads of franchises to drive creative excellence and operational agility across each brand on their path to building annual billion euro brand ecosystems.

Second, we will have finalized by the end of the year, the design of our new operating model built around creative houses, independent business units with the objective of driving stronger creative vision, greater focus, efficiency, autonomy and accountability. We will unveil the full details of this model in January.

Overall, we benefit from a strengthened balance sheet. Our non-IFRS net debt position stood at EUR 1.15 billion at end September with a cash and cash equivalent position of EUR 668 million. The EUR 1.16 billion proceeds from the Tencent transaction will enable us to deleverage the group and notably proceed with the early repayment of the term loan and Schuldschein loans, which have an outstanding principal amount of approximately EUR 286 million.

Of note, EUR 210 million were due next month. Additionally, we will cancel the undrawn revolving credit facility and initiate discussions with our banking partners with the objective of putting in place a new facility designed to support our strategic ambitions, in line with the broader transformation currently underway. Overall, we plan to rely on a very comfortable cash and cash equivalent position at end of March 2026 of around EUR 1.5 billion.

Third, we continue to make progress on our new cost reduction program, which targets at least EUR 100 million in fixed cost savings by fiscal year '27 versus fiscal year '24 -- versus fiscal year '25, sorry. Thanks to continued discipline in hiring and targeted restructuring efforts. The group's global head count stood at 1,797 at the end of September, representing a decrease of around 1,500 employees over the past 12 months and about 700 since the end of March.

Since the end of the semester, a targeted voluntary leave program and a proposed restructuring were introduced at our Nordic studios. Overall, the H1 fiscal year '26 fixed cost base stood at around EUR 701 million, a decrease of EUR 69 million or 9% year-on-year, including a favorable EUR 19 million foreign exchange impact. Out of the EUR 69 million reduction, approximately EUR 55 million came from lower capitalized investments.

Before I turn to the outlook, I would like to cover an IFRS update. As Yves mentioned, we had to delay publishing our results. Towards the end of the review process of our H1 financial accounts, our new panel of auditors reviewed the analysis that had led to the fiscal '25 accounts being validated by our former panel of auditors in May. This related specifically to the IFRS 15 revenue recognition of one meaningful partnership in fiscal '25.

The new panel of statutory auditors considered that utilization-based payment schedules must now be recognized under IFRS 15 as revenues over utilization even if the commitments are firm. This ultimately led to the restatement of our fiscal '25 account as per IAS 8. We then had to assess the impact of this restatement as well as the implication of this new position on the second partnership booked in Q2 along the same initial principles.

The combined effect of what I've just described results in the company not complying with its leverage covenant ratio under certain existing financing agreements at September 30, 2025. However, this is being addressed by the aforementioned actions relating to the concern debt instruments. The restatement of the prior year financial accounts are detailed in the appendix of our press release, and the IFRS accounting restatement has no impact on the group's non-IFRS indicators given the firm nature of these amounts and has no impact on the operating cash flow profile of the group.

Beyond this technical restatement, I want to make one thing clear. Our approach to B2B partnerships as a critical complement to our B2C business has always been and will continue to be centered around maximizing the value of our catalog, which we measure in terms of cash flow generation over time.

Turning to the full year outlook. The stronger-than-expected benefit from partnership increases our visibility for the fiscal year in a context where, on the one hand, there remains a number of new releases to come by the end of the fiscal year. And on the other hand, Rainbow Six Siege faces an increased competitive FPS environment.

In this context, we reaffirm our full year objective with net bookings to be stable year-on-year, non-IFRS operating income to be around breakeven and negative free cash flow, reflecting the group's transformation. Following the closing of the Tencent transaction, we expect to maintain a consolidated non-IFRS net debt position of around 0.

Looking at Q3, we expect net bookings of approximately EUR 305 million, which will represent a slight increase year-on-year. Q3 will notably see the releases of Anno 117: Pax Romana as well as the Avatar Frontiers of Pandora from the Ashes expansion. Anno 117: Pax Romana launched on November 13, and marked a bold new chapter for the Anno franchise, building on the series strong momentum and releasing simultaneously for the first time on PC and console, it showcases impressive scale, striking visual fidelity and a deep economic simulation.

The title has already received strong industry recognition, including winning Best PC Game at Gamescom and has now launched to strong critical reception with an 85 Metacritic score, the best score ever in the franchise, which translates into solid consumer spending growth after 1 week compared to the successful Anno 1800. IGN awarded it 9 out of 10 calling it "a gorgeous antique city-builder that is worthy of a standing ovation".

For the first time in the series, players can choose their starting province is defined by distinct cultural identities and unique gameplay mechanics that emphasize player choice. This innovation expands the game's depth and replayability, laying the foundation for sustained player engagement and rich post-launch experience.

The Avatar: Frontiers of Pandora - From The Ashes expansion is set to launch on December 19. Timed to coincide with the theatrical release of Avatar: Fire and Ash. This bold expansion sees players embark on the journeys of So’lek, a battle-hardened Na’vi warrior who seeks revenge against the ruthless Ash clan. The expansion introduces new visceral gameplay set in a ravaged Kinglor Forest and unveils a new subregion known as The Ravines.

Ahead of that, a highly anticipated free update introducing a third person mode will arrive on December 5 and will feature long requested by the community. Together, this content should further strengthen engagement and extend the game's momentum into the holiday season.

And for its part, Q4 will see the release of the Prince of Persia: The Sands of Time remake, Rainbow Six Mobile, The Division Resurgence as well as an unannounced title.

Beyond fiscal '26, we expect to return to positive non-IFRS operating income and free cash flow generation in fiscal '27 and to see significant content coming from our largest brands in fiscal '27 and fiscal year '28.

Finally, as always, here are a few fiscal '26 housekeeping items for modeling purposes. The stock-based compensation is expected at around EUR 32 million, down versus prior guidance and reflecting the lower share price. The non-IFRS net financial charge, excluding foreign exchange, is expected at around EUR 45 million, unchanged versus prior guidance and reflecting a year-on-year increase, primarily attributable to a lower interest income.

The non-IFRS tax rate is not relevant in the context of breakeven non-IFRS operating income and the number of diluted shares is expected at around EUR 132 million, reflecting the fact that with an expected negative net income, the dilutive nature of our instruments no longer kicks in. We are now ready to take your questions.

[Operator Instructions] And your first question today comes from the line of Aleksander Peterc from Bernstein.

The first one would be pertaining to the breach of covenants. So although this is quite temporary, I'd still like to know if there are any of your other debt instruments that don't have these covenants, but have a standard cross-default clause that could be enforced. Is that a risk over the coming days or not?

It's just a hypothetical, but just to clear that for me. And the second question is, given your below expectations third quarter, it seems to me that the implied fourth quarter is extremely strong, down only 15% year-on-year. But last year, you had the Assassin's Creed Shadows release, which has delayed and that's propped up the fourth quarter quite substantially. So can you help us understand how are you going to achieve this super strong fourth quarter?

Yes. Thank you, Aleks. Yes, so that's on your first question, so we are addressing the topic by settling the repayment of our covenant-based debt, Schuldschein and term loan, and we are canceling the RCF before building a new credit backup line facility by repaying EUR 286 million in principal amount, keeping in mind that we were anyway preparing to repay EUR 210 million that were due in December and EUR 50 million in September.

So overall, the net acceleration is estimated to be around EUR 25 million if we look at the impact on the medium-term cash trajectory for the company. So that has nearly no impact. We don't expect any impact on the overall debt structure.

And keeping in mind that we will benefit from a very comfortable EUR 1.5 billion cash and cash equivalent position at the end of March. In terms of Q4, yes, as you mentioned, it would be significantly lower than the Q4 that we posted over the last 2 years. Keeping in mind that Shadows only impacted Q4 last year for 10 days. So this quarter will benefit from slate of new releases, including the remakes of Prince of Persia: The Sands of Time, Rainbow Six Mobile, The Division Resurgence and unannounced title.

We have a meaningful contribution of partnerships, B2B partnerships, but to a lower extent than last year. We expect a strong Rainbow Six Siege that will go through the Six Invitational and starting into the next year. We will have the follow-on sales impact from Anno 117 and the Avatar expansion. So all this will contribute to the key building blocks of Q4.

[Operator Instructions] And your next question comes from the line of Nick Dempsey from Barclays.

So my first question is, have the auditors looked at all of the partnership deals that you have done going back several years, so we can be comfortable that what we are seeing here is the final restatement impact, we won't get more, for example, at the full year '26 results.

Second question, if I look at the restatement for FY '25 and the restatement for the last 12 months period, it seems quite a big difference. I understood something, but can you perhaps explain the difference between those 2 restatements, given that I thought it related to particularly one partnership deal? And then the third question, in terms of any partnership deals landing in Q4, do you have good visibility on when they land and whether they will land?

Yes. So on the first question, so there is no risk on the prior year financial accounts. It's, by the way, interesting to have in mind that when you look at the many partnerships that we've been signing over the last 7 years, if you look at all the partnerships between fiscal year '19 and fiscal year '25, all of them have converted into cash.

So that traces back to the quality of the earnings and the very strong cash conversion coming from these various partnerships. In terms of -- so on your following questions, I understand that you're talking about the fiscal '25 restatement. So it refers to a meaningful partnership. And if you look at the first half fiscal '26, you see the difference between IFRS revenues and non-IFRS net bookings, and you'll see that also it's driven by the second partnership that I mentioned earlier.

And in terms of Q4, so as we said, we've had an increased visibility on this B2B partnerships performance. And so yes, we have a meaningful contribution that is expected in Q4, but to a lower extent than last year.

But you have full visibility on that landing in that time frame or you don't? That was my question.

Yes, we have a good pipeline of partnerships that we are working on.

There are currently no further questions. I will hand the call back to you.

So thank you very much for your questions, and have a good day or a good evening. Thank you.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.