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Good afternoon, and good morning, everybody. Thank you for joining our conference call.In the third quarter, we nicely outperformed our expectations, thanks to 2 key drivers that are essential to our long-term development and success: First, we continued to make great progress with live operations. Rainbow Six Siege was huge again, Ghost Recon Wildlands had a very solid performance and The Division was loaded for its fantastic comeback. Finally, Assassin's Creed Origins is on track to almost double players' playtime versus prior Assassin's Creed titles. This is an amazing achievement. The second driver, the increasingly recurring nature of our business, is also having an impressive impact on our new releases. With more time to polish our games, we have been able to release 3 high-quality titles since August with Assassin's Creed Origins, South Park and Mario + Rabbids. This achievement further reflects the profound transformation we have been delivering over the past years. We have recognized the need to transform the DNA of our portfolio to engage players over a longer period of time. As such, we have invested heavily in new brands and evolved our franchises with a stronger focus on multiplayer and RPG mechanics. And today, the majority of our franchises engage players over the long term.We have also focused our energy and resources on a smaller number of releases to maximize their potential. Finally, we have fully embraced the significant increasing resources required to develop ever bigger games. In the past 10 years, we have hired over 9,000 talented people, and we were the first to set up the Multi-studios organization with a major focus on collaboration as well as on skills and technology sharing.We believe our strong execution is indicative of the benefits of both, the transformation and our long-term approach. I now hand over the call to Alain.
Thank you, Yves, and hello, everybody. Our Q3 sales ended up higher than initially anticipated. Sales reached EUR 725 million, up 37% year-on-year, outpacing both our initial target of EUR 630 million and the recently revised target of EUR 700 million. We achieved this strong performance despite a EUR 22 million negative impact from exchange rates.Our growth was principally driven by our new releases. Assassin's Creed Origins confirmed the early impressive trends we highlighted in November. Players are thrilled with the splendor of Ancient Egypt, the huge scope of Origins world and its new gameplay. The game outperformed versus our expectation and was the third best-selling title in the EMEA in calendar 2017. This confirms the successful comeback of Assassin's Creed franchise, and it is very promising.We have also been very pleased by Mario + Rabbids: Kingdom Battle, which was the #1 third-party game on the Switch in 2017. The success of its recent release in Japan confirmed this strength. With the Switch's strong momentum, Mario + Rabbids should benefit from long-lasting sales. Ubisoft emerged as the clear third-party leader on Switch, and we will continue to build on our great 10-year-plus relationship with Nintendo.Our performance this quarter was also spurred by the long-term support of our games and of our communities. Here are some details: the implementation of RPG mechanics in Assassin's Creed Origins combined with a very ambitious first-launch plan had a very positive impact on players' engagement; year 1 playtime is expected to almost double in comparison to the franchise average excluding Black Flag, which already featured RPG elements; on live operations, our success with great conversion rates. For example, 42% of players used the photo mode and shared already over 42 million photos with our community. 64% of players have also engaged in the Avenge quest. The March quarter has already seen the release of The Hidden Ones DLC. We will launch another great update with The Curse of the Pharaohs DLC, and we will offer players the discovery tool, a combat-free mode that we liked as a virtual museum of ancient Egypt.The momentum behind our Tom Clancy titles continues to be extremely strong, with close to 60 million unique players for the combined Tom Clancy brands. This represents an acquisition of close to 60 million new players to the franchise since our update last May. This was obviously driven by the performance of The Division, Ghost Recon Wildlands and Rainbow Six Siege that I will now detail.The 1.8 update of The Division has been extremely well received. The game is in its greatest state ever, and players enjoyed the wide and varied set of available endgame activities. As a result, engagement following the update has more than doubled in December. The division achieved its best acquisition level since March 2016. The production team at Massive Entertainment will continue to support the game going forward.With Ghost Recon Wildlands, the introduction of the free PVP mode, Ghost War, combined with a free DLC starring the legendary Predator, contributed to solid engagement levels. The Development team's commitment to monthly updates to the PVP mode was very well received by the community. Wildlands ranked as the seventh best-selling game in EMEA and 10th in NCSA in calendar 2017, adding another strong franchise to Ubisoft's roster of multiplayer brands.The quarter also saw another amazing performance from Rainbow Six Siege. MAU reached new records in December with the release of Operation White Noise. The game is continually ranked in the top 5 most played titles on Steam, and it ended up in the top 10 most watched games on YouTube in 2017. The team will release Outbreak on March 6, a limited time co-op event that will run for 4 weeks.The game's eSport momentum continues to gain steam. The number of viewers for the season 3 final in São Paulo was 2x bigger than the prior season final. Rainbow Six Siege Pro League has recently welcomed Evil Geniuses, Team Liquid, FaZe Clan and Counter Logic Gaming, some of the biggest and best-known eSport organizations.Finally, we recently unveiled a new format for upcoming years. Our competitive scene will have a longer season, with the addition of the second major event in August and an additional circuit of minor events that will bring the total events to 2 majors, 2 Pro League finals and 4 minors in addition to national leagues in 17 countries.One year after the launch of For Honor, more than 7.5 million players have joined the battlefield, with over 1 million unique players playing every month. The game also ranked fifth most-viewed new game on Twitch in 2017. More than 5,000 elements of new contents and 30 games updates have been enriched the game so far. We will continue supporting the game throughout 2017.On February 15, For Honor's fifth season, Age of Wolves, will bring major updates to the game, including the deployment on February 19 of the highly anticipated dedicated service on PC and soon after on consoles.The Ubisoft Club continues to be a differentiator to Ubisoft and to bolster player engagement across games and platforms. And since its release 2 years ago, 475 million club challenges have been assigned in Rainbow Six Siege. Community challenge have also been integrated in Assassin's Creed Origins, and we continue to play an important role in future titles. We are making good progress on the mobile side with Q3 revenue up 76% year-on-year, driven by Ketchapp, Growtopia and by new the new release of South Park: Phone Destroyer and Might & Magic: Era of Chaos. Phone Destroyer had the best performance ever achieved by a game released by our internal studio. Era of Chaos, developed by Playcrab and published by Tencent, just crossed the EUR 100 million gross revenue in China. Finally, Ketchapp saw its revenue grow more than 100% year-on-year. Its recent launches, Finger Driver and Knife Hit, both ranked most downloaded games on iOS in the U.S. Moreover in January, Ubisoft announced a new partnership with Tencent to bring a selection of Ketchapp games to its newly launched mobile web scene mini-game application. Weixin, the WeChat mirror application for Mainland China users, is the most popular mobile application in the country with around 980 million MAUs. This represents a fantastic opportunity for Ketchapp to broaden its audience in China.As you can see, our live services continue to drive strong engagement and digital performance. In only 9 months, we have already reached the same level of unique players, session days and playtime that we did in the full fiscal year '17.Over the 9 months, group MAUs, excluding mobile, were up 34% year-on-year and mobile DAU were up 170%. As a consequence, 9-month digital revenue reached EUR 670 million, up 75% year-on-year and player recurring investment was up 87% to EUR 319 million. Digital and PRI represented, respectively, 56% and 27% of total revenue, a steady progression versus last year of 47% and 21%.Digital distribution for AAA titles represented 55% of total distributed units versus 48% last year.Over the first 9 months, back-catalog momentum continues to be very strong with revenue of EUR 609 million, up 32%. It amounted to 51% of total revenues, confirming the recurring profile of the business. During the third quarter, back-catalog grew 13%. Last year comparison's base was particularly strong with the release of Assassin's Creed [ Age of Trilogy ] as well as Survival, the second paid expansion of The Division.From a geographical standpoint, Asia revenues were up almost 87% year-on-year, excluding Japan, and the region continued to represent a meaningful growth opportunity.Let's now turn toward the full fiscal year '18. We confirm today our targets with revenue of approximately EUR 1,640,000,000, and non-IFRS operating income of approximately EUR 270 million. In light of our strong Digital momentum, we are now expecting Digital at around 55% of total revenue versus above 50%. Player recurring investment should end up around 25% of total revenue versus above 21% previously. And back-catalog is now expected at around 45% versus above 40% previously.Our assumption remain the same with stock-based compensation of around EUR 40 million, net financial charges of around EUR 30 million and with the number of diluted shares at roughly 122 million shares.Regarding the average tax rate, we are still evaluating the impact of the recent U.S. tax changes. For the time being, we are maintaining our assumption of around 25%.Regarding exchange rates. Our full year assumptions are based on the euro at USD 1.17 and at CAD 1.49. We expect Q4 sales of approximately EUR 449 million versus EUR 649 million last year. This drop has can be explained by having 2 releases, For Honor and Ghost Recon Wildlands in last year Q4 versus 1 this year and by the fact that Far Cry will be released right at the end of March. With preorder pacing ahead of any previous Far Cry game at this period before launch, Far Cry 5 is gearing up to be both the most successful entry in the franchise and the biggest multi-platform launch for the first 8 months of the calendar year. Players are being drawn in by the engaging cult theme and setting in Montana, U.S.A. The recently announced Far Cry season pass was also well received by players who are excited about the setting of the DLC, which includes traveling back in time to Vietnam, facing hordes of zombies and by leading Earth to battle Martians arachnids. Finally, we are also confirming our fiscal year '19 targets, namely sales of around EUR 2.1 billion, non-IFRS operating income of around EUR 440 million and free cash flow of around EUR 300 million. As announced in December 7, we are updating the assumption behind our top line target. To reflect the increased recurrence and profitability of our business as well as the reshuffling of our lineup, we are now expecting to sell around 23 million units of our 4 AAA titles versus 20 million units previously. At the same time, Digital expectation have been raised to represent around 60% of total revenue versus above 55% previously. PRI continues to be expected above 25%. Back-catalog is expected to grow strongly and to represent over 45% of total revenue. Our assumptions are based on a euro at USD 1.25 and at CAD 1.52.I now hand over the call back to Yves.
Thank you, Alain. Now to conclude, we have again demonstrated strong execution across the board, with great performance from our new releases and back-catalog games as well as with very solid progress on live operation, Ubisoft has never been better positioned to deliver its 3-year plan. We are committed to create great long-term value, and there is a lot more to come well beyond 2019. So we are now ready to take your questions.
[Operator Instructions] We'll take our first question today from Tim O'Shea from Jefferies.
So player recurring investment surged 87% this quarter. My question is how much of this growth is coming from AC? Your big open world games like Assassin's Creed typically haven't generated the same kind of PRI compared to other -- your multiplayer titles like the Tom Clancy shooters. So I'm just curious how AC is monetizing post launch. Alain, obviously, spoke about the RPG elements driving engagement. I'm wondering how this engagement is translating into PRI.
Thank you for your question. Yes, the PRI on Assassin's Creed is a lot better than what we had on the other formats -- on the previous releases, sorry. What we can say, though, is that overall, it is important, but it is not the most important PRI generator.
And by the way, on the quarter, the PRI improved by 96%. The 87% is over 9 months. So as you can see, during the quarter, we had terrific growth of PRI.
And what we can see is when the time played is increasing, there's always a good growth of the PRI.
We'll take our next question from Nicolas Langlet from Exane.
I've got 3 questions, please. The first one on Assassin's Creed, any chance you can share with us the number of units sold in Q3? And what's your base estimate for the full year? Second question on Assassin's Creed, again, Origins. Can you tell us what was the attachment rate of the recent season pass? And how this compared to previous AC Syndicate? And last question on Rainbow Six, can you tell us a bit more regarding the evolution of the number of members, average daily user and [ extra progression ], et cetera?
So on Assassin's Creed number of units, what we can say is that the trend was to double Assassin's Creed Syndicate, and the game continues to do extremely well. So we can't give specific numbers, but it's really on track to on its lifetime do around 2x what the previous one did.
In terms of the season pass, we don't have any particular data to provide right now, the attach rate versus last one, I would say.
What we can say is that it's a lot better than what we had before.
And regarding Rainbow Six, what we said is that in December, we really had a record amount of players week after week. So we are very happy about how Rainbow Six is behaving. And we feel that if we are right, the game is set to continue to grow in the coming months and years.
Okay, okay. If we look for example at the close to 60 million members for the Tom Clancy franchise, how much of that was related to Rainbow Six?
We are talking here of unique players. That means that somebody could play on Rainbow Six and also on Ghost Recon -- so both The Division -- on both The Division. So those are unique players. And of course, I think the last time we spoke about Rainbow Six, we mentioned that we had over 25 million players that have come to play on that game that are registered on the Rainbow Six. And the community is still growing. The team will -- by the way, update the data in the coming weeks for each of the games to give more indication to the gaming community.
Our next question comes from Chris Merwin from Goldman Sachs.
I just had a couple. So I see you had a really strong 3Q for PRI, which by its nature is a more recurring source of revenue. Just curious why the 4Q guide came down a little bit on sales. Is that -- and that's just from your December update. Is that conservatism against your FX headwinds or any other factors affecting the new guidance for the 4Q? And then secondly, also on the topic of PRI, I imagined that's also very positive for the margins of the business and you also maintained your full year outlook on operating income as well. So do you expect that you're getting higher incremental margins for PRI? Or are you investing those back in the business anywhere? Any place that you could call out for us?
Yes, just to -- for Q4, what you have to consider, as Alain mentioned earlier, is that last year, we had 2 releases, 2 big releases. This year, we have 1 with Far Cry 5 and it's happening the 27th of March. So it has quite an impact on the quarter. Maybe Alain, you have more comments?
Yes. What I can say is that when you -- we announced EUR 700 million, we always try to be a bit more conservative so I would say that, again, we believe that the EUR 469 million we gave as a reference for fiscal -- for quarter 4 is prudent also. So we don't feel that there is any particular downside. On the contrary, we feel that all our back-catalog is doing well. The releases that we launched in the first 9 months are performing well. They will be stronger than last year. It is just that we have less new launches and that there is an impact on that. Besides -- regarding the profitability, I would say that if you look at what was the scenario at the beginning of the year and what it is today, you can say that we will achieve EUR 1,640,000,000 and EUR 270 million of EBIT on 2.5 games versus 4 games at the beginning of the year, with also the fact that the U.S. dollar -- or the euro didn't really go in the way we would have loved. So if you consider all that, I would say that we actually pretty much outperformed in profitability. And you will see that taking place in terms of gross margin because as we grow our Digital revenue, we will have better gross margin. We expect also to make some good efficiency results on the sales -- the SG&A. However, on the R&D, as we said, the games are more ambitious. We have higher live operation. So we expect our R&D to be a bit higher than last year. So that gives you a little bit of flavor of what it is going to happen. And for next year, it will be, I think, a bit similar. Most of the improvement of our profitability will come from gross margin and sales and marketing efficiency. So those are the really big elements. But as you said, we are probably reinvesting in R&D to make sure that we deliver the right quality and the right services.
To cope with the competition.
Yes.
Next question comes from Robert Berg from Berenberg.
Yes. Two questions from me. The first is actually around free cash flow. Maybe one for Alain. Going back a couple of years and you had that pretty significant working capital outflow when you went from 1 smaller Q4 release, I believe, in South Park to 2 larger ones in the following year. Now you're going back from 2 large ones to 1, and that 1 being on the 27th of March. Should we expect a pretty significant working capital inflow this year? Or is there a reason why that would not be the case? And the second question is around your eSports and the kind of impressive viewerships that you're seeing now for a couple of your games. We can see from the revenues engagement some of the indirect benefits that you're seeing with regards to monetization. But are you thinking -- or could you detail any steps you are taking, if any, of directly monetizing eSports, whether now or in the next few years, whether through tournaments, games, sponsorship, et cetera?
So I will probably answer on eSport and Alain will come back on cash flow. So on eSport, really, what we said last time and we continue to do that is really create the sport lead time with very, very strong teams all around the world. And with time, we will see more and more monetization. Yesterday, it's indirect monetization as we have more and more players joining the game because of the competition they watch. What is very impressive is the growth of viewership of our competition. And I'm going in Montréal next week to see the final that will happen next Sunday. So what we see is this is taking more and more space on social media and we think that if we continue to perform like that, we will be able to make Rainbow Six one of the biggest eSport games in the industry. So very quickly after that, there will be lots of revenue coming from that as well. But the priority is really to make sure people have fun, that they can play from anywhere with the best teams around. And if we manage to do that, we will really create a sport that will be acclaimed and watched everywhere.
So coming to cash flow, what I can say is at this stage, we expect cash flow for fiscal year '18 to be higher than fiscal year '17. You know we had EUR 86 million free cash flow last year. I would think that we are going to exceed EUR 100 million. That said -- and it would be even more because we are making the decision this year to not discount some of the our receivables, whether it's the tax credit in Canada or some of our accounts receivable from customers. So that represents probably close to 60 million. So as you can see, that would be more than the doubling of our free cash flow versus last year. And as you mentioned, one of the reasons is that we will have a lower working capital even though we do not discount all our receivables as we did last year. On the other side, because we postponed some of the games or at the end of the year onto next year, the gap between R&D capitalized will be still high. As we mentioned several times, we expect that gap to be closing down quite significantly next year while we will have 4 major games. And because of that reason, a greater share of our EBIT next year will turn -- will materialize in free cash flow. I hope this is clear.
We'll take our next question from Mike Hickey from The Benchmark Company.
Two questions. One, I think you just introduced loot boxes into Rainbow Six Siege and Wildland, as Yves talked to the success there, the monetization versus the feedback you may have gotten from the community. And also curious about, I guess, maybe in Europe versus the last year, it seems like there's potentially more pressure from the regulatory front in terms of potential framework around [ loot boxes and introduction to the games ]. And I have a follow-up.
Okay. On loot box, what we can say is that it's -- we define it as a question of quality and choice, as simple as that. And it's really related to every player recurring investment, whether it's loot box or something else. Clearly, we need to deliver for whatever we offer the right quality for people to be interested. And at the same time, they need to feel that they are really free to not buy it. And their choice is really a fact. We do believe that the way we've done it, whether it's in Rainbow Six or actually also in Assassin's Creed, where we offer much more to monetize and we get much greater monetization has been actually well perceived. You're right, there has been some discussion in a few countries about how that should be treated. Clearly, the discussion that we are having today seems to go -- when people I explain how it works, the discussions are much more, I would say, much calmer than they initially appeared. So we feel that we're going in the right direction, and we don't feel that there is a major issue, a regulatory issue that we should be facing.
Our priority is [indiscernible] -- and it's possible to our players.
Okay. The last question from me. I guess just as it relates to Nintendo, I think you sort of have a unique relationship now, obviously, success with Mario + Rabbids. I just hope you could talk more about the success, overall, of that collaboration with Nintendo. And any sort of strategic opportunities that you see for yourself and Nintendo in the future, maybe thinking about Nintendo IP and possibilities on mobile.
So yes, this relationship continues to grow, and we are very happy with what we were able to achieve with Mario + Rabbids. And we must not also forget the fact that Just Dance is also a big seller on the Switch and that it will continue to follow the growth of that machine. And yes, in the future we are going to do more things. We just can't go over that right now.
Our next question comes from Doug Creutz with Cowen and Company.
Yes. The Division has had kind of a long and bumpy road, but it does seem to have gotten to a place where the player bases are happy. To the extent that you're working on, let's just say a game versus one of The Division now, I know you guys haven't announced Division 2. But how able are you to incorporate the things you learned from line services in a game into the ongoing development you may have on new games?
It's a good question. In fact, the game is always a recipe to try new things and the -- not a recipe, sorry, a place to try new things. And we are experimenting lots of new game plays and lots of new elements in The Division 1. And that's helping us to prepare for what could come in the future in the brand. So yes, having lots of players playing and giving feedback to the teams regularly is something that helps tremendously to come with better content.
I think we have 2 objectives: making our community happy, and I think we achieved that; and the second is, as you rightly said, it was to try everything we could to polish the game to make it the best experience possible. I think now we have a much clearer idea of what should be done for the future. So that was very positive.
[Operator Instructions] We'll take a question from Charles Scotti from Kepler.
Three questions if I may. You also had a nice improvement of player recurring investment in Q3 and over the 9 months. Can you give us a little bit color on the development of concentration of this player recurring investment as, I guess, that Rainbow Six Siege accounts for most of that? Second question on Assassin's Creed, now that you have made a quite successful comeback from Assassin's Creed, do you intend to launch Assassin's Creed again on a yearly basis? And my third question is a more general one. After this strong hiring phase, do you think you are able to release more AAA titles, let's say, 5 or 6 AAA titles a year, which will be a way also for you to gain market share on top of more player engagement?
Thank you for your question. So yes, the PRI is distributed around many games. You can consider Rainbow Six, Assassin's Creed, Ghost Recon, The Division, For Honor, The Crew, Steep, so all of those games are generating good PRI, thanks to the fact that they are played a lot. So we are very happy with the dedication of players and the teams to make sure we can bring a great experience on all those games. So we see a good trend there with more fun and more revenue. So under the Assassin's Creed subject, we are concentrating at the moment on ACO, for which we are going to launch a few of the DLCs. So you will be amazed by what we will come on ACO. So that's the only thing we can say now.
And on the number of games, clearly, we are not going to go to 6 or plus games for the future. Really, we try to go with ever bigger games, more successful. And actually what we were trying to convey as a message is that the fact that our back-catalog, that our live services are delivering so much benefit to the company, it is relieving us from the must-have release that we had in the past. So really, today, as you have seen, we have been able to deliver a much better performance with only 2.5 games. So next year, there will be 4 games. We believe that it is a pretty good number.
And the goal is really to increase the number per game and increasing the quality so that if we -- they can stay longer on the market and they can be more and more appreciated by players.
It appears there are no further questions. At this time, I'd like to turn the call back to Mr. Guillemot for any additional or closing remarks.
Well, thank you very much for listening today, and have a great day or a great evening. Thank you. Bye-bye.