Unity Software(U) - 2025 Q2 - Quarterly Results

Unity Q2 2025 Earnings Release Financial Highlights Unity reported Q2 2025 revenue of $441 million, a 2% decrease year-over-year, exceeding guidance, with a GAAP net loss of $107 million and strong Adjusted EBITDA of $90 million and free cash flow of $127 million, driven by the new AI platform Unity Vector - The CEO, Matt Bromberg, described Q2 2025 as an "inflection point" for Unity, with results substantially beating guidance for both revenue and Adjusted EBITDA[2][3] Financial Metric Comparison | Financial Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $441 million | $449 million | -2% | | GAAP Net Loss | ($107 million) | ($126 million) | Improved | | GAAP Net Loss per Share | ($0.26) | ($0.32) | Improved | | Adjusted EBITDA | $90 million | $113 million | -20% | | Adjusted EPS | $0.18 | $0.22 | -18% | | Net Cash from Operations | $133 million | $88 million | +51% | | Free Cash Flow | $127 million | $80 million | +59% | - The new AI platform, Unity Vector, drove 15% sequential growth in the Unity Ad Network during the second quarter[3] Business Segment Performance Create Solutions revenue grew 2% to $154 million, while Grow Solutions declined 4% to $287 million, with strong Unity Ad Network growth offsetting other ad product declines Segment Revenue and Key Drivers | Segment | Q2 2025 Revenue | YoY Change | Key Drivers | | :--- | :--- | :--- | :--- | | Create Solutions | $154 million | +2% | A ~$12 million term license sale and increased subscription revenue | | Grow Solutions | $287 million | -4% | Strong Unity Ad Network performance (15% QoQ growth) offset by declines in other Ads products | Profitability and Cash Flow GAAP net loss narrowed to $107 million, Adjusted EBITDA reached $90 million (21% margin), and free cash flow significantly increased to $127 million - GAAP net loss improved to $107 million (a -24% margin) from $126 million (a -28% margin) in Q2 2024[9] - Adjusted EBITDA was $90 million (21% margin), down from $113 million (25% margin) in Q2 2024. The better-than-guided margin was attributed to higher revenue and continued cost discipline[10] - Net cash provided by operating activities increased to $133 million, and free cash flow grew to $127 million, up from $88 million and $80 million respectively in Q2 2024[9][10] Financial Position Unity maintained a strong liquidity position with cash, cash equivalents, and restricted cash totaling $1.702 billion as of June 30, 2025 - Cash, cash equivalents, and restricted cash stood at $1.702 billion as of June 30, 2025, an increase of $174 million from the end of 2024[12] Balance Sheet Summary | Balance Sheet Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $6,716,424 | $6,737,407 | | Total Liabilities | $3,282,349 | $3,310,259 | | Total Stockholders' Equity | $3,193,378 | $3,196,521 | Q3 2025 Business Outlook Unity projects Q3 2025 revenue between $440 million and $450 million and Adjusted EBITDA between $90 million and $95 million Q3 2025 Guidance | Guidance Metric | Q3 2025 Outlook | | :--- | :--- | | Revenue | $440 million - $450 million | | Adjusted EBITDA | $90 million - $95 million | - The Grow segment is expected to see mid-single digit sequential revenue growth from Q2 to Q3[16] - The Create segment is expected to experience a slight sequential decline from Q2 to Q3, attributed to the impact of a large customer win in Q2[16] Consolidated Financial Statements Presents unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows for Q2 2025 Condensed Consolidated Balance Sheets - Presents the company's assets, liabilities, and stockholders' equity as of June 30, 2025, compared to December 31, 2024[17][18] Consolidated Statements of Operations and Comprehensive Loss - Details revenues, costs, and expenses to arrive at net loss for the three and six months ended June 30, 2025, and 2024[20][21] Consolidated Statements of Cash Flows - Outlines the cash inflows and outflows from operating, investing, and financing activities for the three and six months ended June 30, 2025, and 2024[22][23] Reconciliation of GAAP to Non-GAAP Financial Measures Provides detailed reconciliations of GAAP to non-GAAP financial measures, including Adjusted EBITDA, Adjusted Gross Profit, and Adjusted EPS - The company uses non-GAAP measures like Adjusted EBITDA, Adjusted Gross Profit, Free Cash Flow, and Adjusted EPS to evaluate ongoing operations and for internal planning[24] - Adjusted EBITDA is defined as GAAP net loss excluding stock-based compensation, amortization, depreciation, restructuring, interest, taxes, and other non-operating items[26] Adjusted EBITDA Reconciliation | Reconciliation Item | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | GAAP Net Loss | $(107,365) | $(125,738) | | Stock-based compensation | $101,435 | $113,766 | | Amortization of intangibles | $86,218 | $88,432 | | Depreciation | $10,710 | $12,977 | | Restructuring costs | $10,886 | $27,714 | | Other adjustments | $(11,367) | $(3,682) | | Adjusted EBITDA | $90,497 | $113,469 | Forward-Looking Statements Contains forward-looking statements regarding future financial performance and strategic initiatives, with cautions on various risks and uncertainties - The press release includes forward-looking statements concerning Unity's outlook, the performance of its AI platform Vector, strategic initiatives, and financial guidance for Q3 2025[35] - Key risks that could cause actual results to differ include macroeconomic conditions, competition, geopolitical instability (particularly in Israel), and the ability to successfully transition executive leadership and adapt to new technologies[35]