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Unity Software(U) - 2025 Q1 - Quarterly Report
2025-05-07 20:20
Revenue Performance - Total revenue for the three months ended March 31, 2025, was $435 million, a decrease of 5.5% compared to $460.38 million in the same period of 2024[88]. - Create Solutions revenue decreased to $150.38 million in Q1 2025 from $163.67 million in Q1 2024, while Grow Solutions revenue decreased to $284.62 million from $296.71 million[92]. - The dollar-based net expansion rate as of March 31, 2025, was 97%, down from 101% in the prior year, primarily due to decreases in Grow Solutions revenue[84]. - The company expects revenue associated with non-strategic portfolio to decline further through the remainder of 2025, with approximately $34 million in Q1 2024 and $17 million in Q1 2025[92]. - The company is migrating a portion of its traffic to a new AI platform called "Unity Vector," which is expected to improve revenue performance in the future[94]. Profitability and Loss - Gross profit for Q1 2025 was $321.04 million, resulting in a gross margin of 74%, compared to 69% in Q1 2024[88]. - Net loss for Q1 2025 was $77.91 million, compared to a net loss of $291.48 million in Q1 2024[88]. - Adjusted EBITDA for the same period was $83,943 thousand, an increase from $78,515 thousand in the prior year, while GAAP net loss improved to $(77,907) thousand from $(291,478) thousand[119]. - Adjusted EPS for Q1 2025 was $0.24, compared to $0.28 in Q1 2024, with a GAAP diluted net loss per share of $(0.19) versus $(0.75) in the prior year[120]. Expenses and Cost Management - Operating expenses totaled $448.98 million in Q1 2025, significantly reduced from $690.92 million in Q1 2024, primarily due to workforce reductions[88]. - Research and development expenses decreased to $220.63 million in Q1 2025 from $282.73 million in Q1 2024, reflecting headcount reductions[88]. - The company incurred approximately $14 million in employee separation costs and $6 million in non-employee charges related to workforce reductions in Q1 2025[81]. Cash Flow and Financial Position - Free cash flow for the three months ended March 31, 2025, was $7,308 thousand, a significant improvement from $(14,563) thousand in the same period last year[122]. - As of March 31, 2025, the company had cash and cash equivalents totaling $1.5 billion, primarily held for working capital purposes[123]. - Net cash provided by operating activities was $13,026 thousand for Q1 2025, compared to $(7,373) thousand in Q1 2024[129]. - The accumulated deficit as of March 31, 2025, was $3.8 billion, with expectations of continued operating losses on a GAAP basis for the foreseeable future[126]. - The company plans to meet future capital requirements through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions[128]. - The company issued $690 million in aggregate principal amount of the 2030 Notes in Q1 2025, using the proceeds to repurchase outstanding 2026 Notes[125]. - The company may seek additional strategic partnerships and acquisitions to enhance its offerings, which could increase cash requirements[128].
Unity Software Inc. (U) Reports Q1 Loss, Tops Revenue Estimates
ZACKS· 2025-05-07 13:40
Company Performance - Unity Software Inc. reported a quarterly loss of $0.19 per share, which was better than the Zacks Consensus Estimate of a loss of $0.38, representing an earnings surprise of 50% [1] - The company posted revenues of $435 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 5.60%, although this is a decrease from year-ago revenues of $460.38 million [2] - Over the last four quarters, Unity has consistently surpassed consensus EPS estimates and revenue estimates [2] Stock Outlook - Unity Software shares have declined approximately 5.1% since the beginning of the year, compared to a decline of 4.7% for the S&P 500 [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters [4] - The current consensus EPS estimate for the next quarter is -$0.29 on revenues of $426.57 million, and for the current fiscal year, it is -$1.10 on revenues of $1.77 billion [7] Industry Context - The Internet - Software industry, to which Unity belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Unity's stock performance [5][6]
Unity Software(U) - 2025 Q1 - Earnings Call Transcript
2025-05-07 13:32
Financial Data and Key Metrics Changes - The company exceeded the high end of its revenue guidance by $20 million, with adjusted EBITDA coming in $19 million above guidance [14][15] - Adjusted EBITDA for the quarter was $84 million, with 19% margins, reflecting a 200 basis point year-over-year expansion [15][16] - Free cash flow improved by $22 million year-over-year to $7 million, despite the first quarter traditionally being modest for cash flow [16][17] Business Line Data and Key Metrics Changes - In the Grow segment, revenue was $285 million, down 4% year-over-year, partially driven by the rollout of Unity Vector [14][15] - The Create segment reported revenue of $150 million, down 8% year-over-year, due to a transition away from low-margin professional services [15] - Subscription revenues in the Create segment grew double digits year-over-year, with nearly 80% of Create revenue now coming from high-margin subscriptions [15][10] Market Data and Key Metrics Changes - The Unity ad network migration to the new AI platform, Unity Vector, was completed ahead of schedule, leading to a 15-20% lift in installs and in-app purchase values on iOS [6][7] - The company is optimistic about the future potential of AR and VR gaming, with predictions of 216 million players worldwide by 2025 [11] Company Strategy and Development Direction - The company is focused on building a culture of execution and discipline, reestablishing trust with customers, and accelerating product innovation to drive growth [6][10] - Unity aims to modernize its advertising business and create sustainable revenue growth over the long term, with a commitment to investing in high-performing products [8][9] - The company is also expanding its platform beyond gaming into other industries, which has become the fastest-growing part of its subscription business [12][13] Management's Comments on Operating Environment and Future Outlook - Management has not seen any noticeable impact from macroeconomic factors on business performance thus far, noting that gaming is historically insulated from economic downturns [40][41] - The company remains optimistic about the performance of Unity Vector and expects it to drive revenue growth in the Grow segment, despite some declines in legacy ad products [18][19] Other Important Information - The company has a cash balance of $1.5 billion and debt of $2.2 billion, with a recent convertible offering well-received by the market [17][18] - The company is focused on minimizing shareholder dilution and stock compensation expenses, which decreased by nearly $45 million year-over-year [16][17] Q&A Session Summary Question: Can you provide more detail on the Vector rollout and customer response? - Management noted that the performance of Vector is exceeding expectations, leading to increased spending from advertisers as they see better returns [25][28] Question: Is subscription revenue growth driven by price increases or new customer growth? - The growth is attributed to both core business growth and the impact of previous price increases, with significant adoption of Unity 6 contributing to this [30][31] Question: What is the trajectory of improvements expected for Vector in the back half of the year? - Management indicated that improvements will be iterative, with measurable increases already seen, and they are optimistic about future performance [34][36] Question: Have macroeconomic factors impacted the business? - Management has not observed any significant impact from macroeconomic conditions, as gaming tends to be resilient during downturns [40][41] Question: What is the current performance of Vector compared to previous ad networks? - The performance is better than expected, with significant improvements in return on ad spend (ROAS) already being observed [116][119]
Unity Software(U) - 2025 Q1 - Earnings Call Transcript
2025-05-07 13:30
Financial Data and Key Metrics Changes - Unity exceeded the high end of its revenue guidance by $20 million, with adjusted EBITDA coming in $19 million above guidance [13][18] - Adjusted EBITDA for the quarter was $84 million with 19% margins, representing a 200 basis points year-over-year expansion [14][15] - Free cash flow improved by $22 million year-over-year to $7 million [15] - Cash at the end of the quarter was $1.5 billion, and debt was $2.2 billion [16] Business Line Data and Key Metrics Changes - In the Grow segment, revenue was $285 million, down 4% year-over-year, partially driven by the rollout of Unity Vector [13][14] - In the Create segment, revenue was $150 million, down 8% year-over-year, due to the transition away from low-margin professional services [13][14] - Subscription revenues in the Create segment grew double digits year-over-year, with nearly 80% of Create revenue now coming from high-margin subscriptions [14][9] Market Data and Key Metrics Changes - Unity Vector is expected to provide a 15-20% lift in installs and in-app purchase value compared to the old model, particularly noted in iOS [5][6] - The Unity platform is seeing strong demand across various industries, with nine consecutive quarters of sequential revenue growth [11] Company Strategy and Development Direction - Unity is focused on creating sustainable revenue growth by modernizing its advertising business and leveraging data from the Unity ecosystem [4][6] - The company aims to capitalize on the growing AR and VR gaming market, with predictions of reaching 216 million players worldwide by 2025 [10] - Unity is committed to enhancing its product offerings and maintaining a competitive edge in the gaming and non-gaming sectors [12] Management's Comments on Operating Environment and Future Outlook - Management has not observed any significant impact from macroeconomic factors on business performance thus far [40] - The company remains optimistic about the future of its Grow business, with expectations of revenue growth driven by improved performance from Unity Vector [18][19] - Management is closely monitoring the economic environment while maintaining a focus on driving returns for shareholders [41] Other Important Information - Unity has completed the migration of its ad network to the new AI platform, Unity Vector, ahead of schedule [4][5] - The company is seeing strong adoption of Unity 6, with over 4.4 million downloads and 43% of active users having upgraded [8][9] Q&A Session Summary Question: Can you provide more details on the Vector rollout and customer response? - Management noted that the performance of Vector is exceeding expectations, leading to increased spending from advertisers as they see better returns [26][28] Question: What is driving the strong growth in subscription revenue? - The growth is attributed to both new customer acquisitions and the impact of previous price increases, with expectations for continued double-digit growth [30][100] Question: How is the transition from legacy models to Vector progressing? - The transition is complete, and the company expects to see cost reductions as it no longer runs the two models in parallel [66][67] Question: What is the expected impact of nonstrategic revenue on future guidance? - Nonstrategic revenue is expected to decline, with approximately $17 million recorded in Q1 and a forecast of $30 million for the full year [92][93] Question: How does Unity plan to leverage data insights across its platform? - The company aims to provide valuable insights into consumer behavior to enhance both advertising and game development, with a focus on optimizing user acquisition [75][76]
Unity Software(U) - 2025 Q1 - Quarterly Results
2025-05-07 11:54
Revenue Performance - Revenue for Q1 2025 was $435 million, a decrease of 6% year-over-year from $460 million in Q1 2024[4] - Create Solutions revenue was $150 million, down 8% year-over-year, while Grow Solutions revenue was $285 million, down 4% year-over-year[4][5] - Revenue for Q1 2025 was $435 million, a decrease of 5.5% compared to $460.38 million in Q1 2024[29] Net Loss and Earnings - Net loss for the quarter was $78 million, significantly improved from a net loss of $291 million in Q1 2024, resulting in a net loss margin of (18)% compared to (63)%[7][8] - Basic and diluted net loss per share was $0.19, compared to $0.75 for the same period in 2024[6][8] - GAAP net loss for Q1 2025 was $77.91 million, significantly improved from a net loss of $291.48 million in Q1 2024[29] EBITDA and Profit Margins - Adjusted EBITDA for Q1 2025 was $84 million, with a margin of 19%, up from $79 million and a margin of 17% in Q1 2024[10] - Adjusted EBITDA for Q1 2025 was $83.94 million, representing an increase of 6.1% from $78.52 million in Q1 2024[29] - GAAP gross profit for Q1 2025 was $321.04 million, compared to $315.99 million in Q1 2024, resulting in a GAAP gross margin of 74%[29] - Adjusted gross profit for Q1 2025 was $359.10 million, slightly down from $376.58 million in Q1 2024, maintaining an adjusted gross margin of 82%[29] Cash Flow and Operating Activities - Net cash provided by operating activities was $13 million, a turnaround from net cash used of $7 million in Q1 2024[9][10] - Free cash flow for the quarter was $7 million, compared to negative $15 million in Q1 2024[10] - Free cash flow for Q1 2025 was $7.31 million, a recovery from a negative free cash flow of $14.56 million in Q1 2024[33] - As of March 31, 2025, cash and cash equivalents totaled $1,552 million, an increase of $24 million from $1,528 million at the end of 2024[12] Guidance and Future Outlook - Q2 2025 revenue guidance is projected to be between $415 million and $425 million, with adjusted EBITDA expected to be between $70 million and $75 million[15] - Unity expects to enhance its platform and accelerate product innovation, with a focus on opportunities in the AR and VR gaming market[34] Expenses - Research and development expenses for Q1 2025 were $220.63 million, down from $282.73 million in Q1 2024, representing 51% of revenue[31] - Sales and marketing expenses for Q1 2025 were $162.01 million, reduced from $230.63 million in Q1 2024, accounting for 37% of revenue[31] Market Positioning - The early success of Unity Vector and strong demand for Unity 6 highlight the company's strategic positioning in the game development market[2]
Unity Software Inc. (U) Just Reclaimed the 50-Day Moving Average
ZACKS· 2025-05-05 14:30
Group 1 - Unity Software Inc. has reached a key level of support and recently broke out above the 50-day moving average, indicating a short-term bullish trend [1] - The stock has moved 26.7% higher over the last four weeks and is currently rated as a Zacks Rank 1 (Strong Buy) [2] - Positive earnings estimate revisions have occurred, with one higher estimate compared to none lower for the current fiscal year, and the consensus estimate has also increased [2][3] Group 2 - The combination of positive technical factors and earnings estimate revisions suggests that investors may want to monitor Unity Software Inc. for potential gains in the near future [3]
2 Stocks Down 89% and 15% to Buy Right Now
The Motley Fool· 2025-05-02 09:13
Market Overview - The S&P 500 index is down approximately 9.5% from its high, while the Nasdaq Composite index has fallen 13.5% [1] - The stock market has experienced significant volatility, which may present investment opportunities in companies with strong long-term potential [2] Unity Software - Unity Software provides tools for developers to create video games and digital content, along with digital advertising tools [3] - Despite being a leader in the game-engine services space, Unity's stock has underperformed, down about 89% from its all-time high shortly after its IPO in 2020 [4][5] - In Q4, Unity's sales declined 25% year over year to approximately $457 million, with a net loss of $127 million [6] - However, revenue from Unity's core strategic portfolio increased 4% year over year to $442 million, indicating potential for recovery [7] - The company is undergoing restructuring and strategic shifts, including changes to its digital advertising network and the rollout of a new AI platform [7] - Unity's shares are considered a worthwhile buy ahead of its first-quarter earnings release on May 7 [8] Kenvue - Kenvue, a spinoff from Johnson & Johnson, has not performed as expected, down more than 15% from its all-time high [9] - The company reported 1.9% organic sales growth in its self-care segment and 4.1% growth in essential health, but a decline of 1.9% in the skin health and beauty segment [11] - Kenvue increased its marketing budget to 10.6% of sales in 2024, but recovery is slower than anticipated [12] - There are signs of improvement in the skin health and beauty segment, with organic sales rising 2.6% in Q4 2024 [13] - Kenvue trades at just below 21 times estimated free cash flow for 2025, close to fair value for a mature consumer staple [14] - The stock offers a 3.6% dividend yield, making it attractive for value investors despite low growth prospects [14]
Unity Software: The Inflection Point No One's Talking About
Seeking Alpha· 2025-04-23 18:09
Michael Wiggins De Oliveira is an inflection investor. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable over the next year.With a focus on tech and “the Great Energy Transition (including uranium)”, Michael runs a concentrated portfolio with approximately 15 to 20 stocks and an average holding period of 18 months. Through his 10+ years analyzing countless companies, Michael has accumulated outsta ...
I Expect Three Catalysts To Propel Unity Software Up And Beyond Recent Stumbles
Seeking Alpha· 2025-04-09 17:17
Core Insights - The individual has retired after over 43 years in investment research, now operating independently to provide actionable investment insights [1] - The focus is on rules and factor-based equity investing strategies, emphasizing the use of numbers to inspire human intelligence-driven investment stories rather than solely relying on statistical studies [1] - The individual combines factor analysis with classic fundamental analysis to uncover the true story of companies and their stocks, highlighting the importance of future potential over past performance [1] Experience and Background - The individual has extensive experience covering a wide range of stocks, including large cap, small cap, micro cap, value, growth, and income [1] - Previous roles include managing a high-yield fixed-income fund and conducting research on quantitative asset allocation strategies, contributing to the development of Robo Advising [1] - The individual has authored two books on stock selection and analysis and has a passion for investor education, having conducted numerous seminars [1]
Here's Why Unity Software (U) is Poised for a Turnaround After Losing -20.12% in 4 Weeks
ZACKS· 2025-04-09 14:35
Unity Software Inc. (U) has been on a downward spiral lately with significant selling pressure. After declining 20.1% over the past four weeks, the stock looks well positioned for a trend reversal as it is now in oversold territory and there is strong agreement among Wall Street analysts that the company will report better earnings than they predicted earlier.Guide to Identifying Oversold StocksWe use Relative Strength Index (RSI), one of the most commonly used technical indicators, for spotting whether a s ...