Unity Software(US:U)2025-11-05 12:29Revenue Performance - Total revenue for the three months ended September 30, 2025, was $470.6 million, an increase from $446.5 million in the same period of 2024, while total revenue for the nine months ended September 30, 2025, decreased to $1.35 billion from $1.36 billion in 2024[94][100]. - The dollar-based net expansion rate increased to 103% as of September 30, 2025, compared to 94% in the prior year, driven by subscription revenue growth and existing customers upgrading to enterprise offerings[90]. - The company had 1,338 customers contributing more than $100,000 of revenue in the trailing 12 months as of September 30, 2025, up from 1,242 in 2024, indicating growth in subscription revenue and increased advertising spend[88]. - Create Solutions revenue for the three months ended September 30, 2025, was $152.4 million, slightly up from $147.4 million in 2024, while Grow Solutions revenue increased to $318.3 million from $299.1 million[98]. - The company expects revenue associated with its non-strategic portfolio to decline further, with approximately $24 million in revenue for the nine months ended September 30, 2025, compared to $75 million in 2024[98]. Expenses and Cost Management - Research and development expenses for the three months ended September 30, 2025, were $244.4 million, up from $215.2 million in 2024, primarily due to increased amortization costs[110]. - Operating expenses for the nine months ended September 30, 2025, totaled $1.37 billion, a decrease from $1.62 billion in 2024, reflecting workforce reductions and restructuring efforts[94][107]. - Sales and marketing expenses for the three and nine months ended September 30, 2025 decreased compared to the prior year due to a reduction in personnel costs from headcount reductions[112]. - General and administrative expenses for the three months ended September 30, 2025 decreased moderately compared to the prior year, driven by cost discipline and reductions in personnel-related costs[114]. - The company incurred approximately $23 million in employee separation costs and $16 million in non-employee charges related to workforce reductions in the nine months ended September 30, 2025[87][107]. Profitability Metrics - The gross profit margin for the three months ended September 30, 2025, was 74%, down from 75% in 2024, while the gross profit margin for the nine months was also 74%, compared to 73% in the prior year[94]. - Adjusted gross profit for the three months ended September 30, 2025 was $388.4 million, compared to $374.4 million in 2024, with adjusted gross margin at 82%[126]. - Adjusted EBITDA for the three months ended September 30, 2025 was $109.5 million, compared to $91.7 million in 2024[126]. Cash Flow and Financial Position - Free cash flow for the nine months ended September 30, 2025 was $285.2 million, an increase from $180.3 million in 2024[130]. - As of September 30, 2025, the company had cash and cash equivalents totaling $1.9 billion, primarily for working capital purposes[131]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $301,520,000, an increase from $203,361,000 in 2024[137]. - Net cash used in investing activities during the same period was $(18,271,000), a decrease from $(35,967,000) in 2024[137]. - Net cash provided by financing activities was $76,113,000, compared to $(357,697,000) in the previous year[137]. - The net change in cash, cash equivalents, and restricted cash for the nine months ended September 30, 2025, was $381,207,000, a significant improvement from $(188,299,000) in 2024[137]. - The decrease in net loss contributed to the increase in cash provided by operating activities, adjusted for non-cash items[138]. - Cash used in investing activities primarily consisted of purchases of property and equipment and non-marketable investments[139]. - Financing activities included proceeds from the issuance of convertible notes and common stock under employee equity plans[140]. Tax and Interest - Interest expense for the three and nine months ended September 30, 2025 increased due to the amortization of new debt issuance costs from the issuance of the 2030 notes[115]. - Interest income and other income (expense), net, for the three months ended September 30, 2025 decreased primarily due to losses from foreign exchange, with a recognized gain of $61.4 million in Q1 2024 compared to $42.7 million in Q1 2025[117]. - Provision for income taxes for the three and nine months ended September 30, 2025 increased due to higher earnings in foreign jurisdictions and the absence of a tax benefit recognized in Q1 2024[120]. Strategic Focus - The company has begun to reset its product and service offerings to focus on its core businesses, referred to as the "Strategic Portfolio," which includes the Unity Engine and related consumption services[86]. - There have been no material changes to critical accounting policies and estimates since the last annual report[142]. - Market risk exposure assessment has not changed materially since the previous annual report[143].