Unity Software(US:U)2025-05-07 13:30Financial 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]