Unity Software (U) 16 Nov 202020 Q3 Earnings call transcript

Thank you, and welcome everyone, to Unity's First Financial Results Webcast, highlighting our Results for the Third Quarter of 2020. It's great to have you join us today after a successful initial public offering. With me on the call today are John Riccitiello, President, Chief Executive Officer and Executive Chairman; and Kim Jabal, Senior Vice President and Chief Financial Officer. After their remarks, we will open the call to a question-and-answer session. I'd like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. and including items, expectations using are including, may, and goals, performance future the intended future something will similar reflect statements. and without believe, to of identify business historical for outlook, financial terminology, other forward-looking Expressions than which fact, expressions limitation, expressions

undertakes risks statements. a may reflect obligation with those the in no law. Actual uncertainties, results discussed The of in update Forward-looking statements statements call, arise by and section as filing involve the except materially events after our forward-looking from differ company number of or required forward-looking revise including Risk Factors may to conference that SEC. this any to order

posted please more website refer investors.unity.com. Relations to information, we at in For have our to statement Investor cautionary included the the slides

thank the to with The meeting, and addition in will a measures of prepared we measures measures financial financial financial or to us, discussion today's John. discuss GAAP to SEC. financial of non-GAAP and it measures. exhibit of in be superior to found as available release, filings to GAAP. website which measures and addition, is our performance I furnished In can will reconciliation limitations accordance during between These and are using non-GAAP on that, not for substitute non-GAAP an joining non-GAAP With our the you over earnings for and the turn in

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over Now Kim let financial Jabal, CFO, go discussion me turn the through results. our to our to

hard This all that is John's their team entire first moment. to Unity for earnings led on you us and want John, dedication time, exciting thank has call. to echo I an for joining to this and our Thank you, work us thanks the and

a We are have very public strong life our quarter. started company such pleased with to

Revenue by This Let was XX% is $XXX quarter reviewing third of XXXX. year-over-year. in begin million me $XXX our million XXXX of compared for an quarter financial the of increase results. with the third

Our And in towards for revenue in revenue, with of XXXX QX. mix shifted X% XX%, Solutions, XX% Create Operate respectively, has accounting partnerships Strategic Operate, and

note of metrics, XX, million. may One rate, sustained into a compare in in levels, compared and our expansion XXXX as of our business, was COVID XXX% XXXX. grew to groups, tailwinds revenue $XX some driven XXXX. of result in expansion this operating Create key our that in net at by high its the down Drilling Please dollar-based Operate tough in XX% XXX% September do recent coming to

the game cycles adapted to Create home environments year our related from of the introduced half in and we QX saw developers While in deal and some COVID first work as business. recovery headwinds slowed,

These Solutions user Our help of are COVID end improvements, turning built to games growing customers results millions in driven the product build the by our Operate very with everything had higher by around of self-driving tailwinds. people and engagement by XD, to XX% world. from in next-generation strong is games part and to video the Unity year. buildings, execution strong a quarter, last versus cars, them office create This customers. real-time alongside enjoyed reflect to

of very sunsetting when and reflect certain lumpy customers. aligned to with this it for be success in with partnerships quarter slower with their This the as within million. gross of through the terms users, was grow cycles our engagement products quarter-to-quarter Our from Non-GAAP flat use year monetization of partners' in really their is compares XX%. revenue When remains This at strategic by they This professional or the tools, and COVID, drives a was important. part our million portfolios. recognized the of $X us, usage to of end grow driven revenue to are our X% $XX last compared their driven meet Food in XX% our savings This well year verticals the but services, well growth the our from The COVID improvement of $XX revenue customers in operations was was year-over-year hosting growth of was our they of in deal Solutions third from of new as period line XX% revenues the revenue quarter last to their growth. growth. of second services, Operate increased Operate onetime grow driving the can margin the XX% last decline revenue XXXX. with A from in demands or we of the same million year-over-year quarter as travel, related and negative loss negative substantial as primarily year. primarily that to acquisition and third Finger Solutions due non-GAAP higher related loss costs April, to our events business. by Non-GAAP of operations facilities. for Strategic

Now guidance. our turning to

reiterate So the to of with context, a uncertainty set related lots XXXX been to to COVID. unusual I pretty that want has year

we until already game happened. that We we throughout the reinvest aren't addition, on expecting engagement And holidays for development believe which OpEx our incremental for in occurred QX, seasonal our the expense hiring announcement but to the marketing of some XXXX. Solutions slated Apple user in normal has an and year material drive the additional R&D new and for in to in Operate with in this now of programs COVID-driven counting around achieved policies originally in increase we QX the sales into savings uncertainty to delayed happens IDFA, perspective, QX essentially revenue as sometime is was typically that business are From continue introduction our from in year's our jump order customers growth.

the of revenue. $XX of to percent approximately million million for and non-GAAP a loss of as million So operations a $XXX quarter, expect fourth XX% revenue to million XX% of to $XX $XXX we or

for of This million to fiscal ending from Our outlook $XXX is up in XXXX reflecting full year-over-year revenue to XX%. XX% $XXX December is million million. growth $XXX XX, the XXXX, year

all percent $XX We to million for XXXX operations a expect to X% of loss revenue, or be non-GAAP million $XX from of from as $XX million approximately down in XXXX.

flow to expect for cash We $XX weighted of fully positive business, net point within QX count free approximately average diluted the be alongside working Operate quarter. I'd that to like share strong an capital. million fourth performance million our Solutions the increase benefited from in XXX out

free guiding concludes quarter-to-quarter, that expect to cash to drop free cash it negative remarks. expect volatile prepared And you we're QX. we not back flow, and in into Although should remain my flow

the thank So led of team work our for to that the thank you again, this Unity all to us entire has you, And hard point. new shareholders. to

have to your happy this and honored are with We are on Richard? you join I journey. take And John questions. that, that to now us decided

we'll today Goldman you, Instructions] Thank Sachs. Great. Kim. start Heather Bellini [Operator So at with

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have happened might guys impacted related your have Sorry, thinking year, that? pushed might -- walk you were then at And expecting know the can XX the momentum I impact to that's since guidance next time versus how a about thinking And the of all XXXX. you the And for the just seasonal? next you pandemic. obviously, you're the that a other congratulations road sorry as you we result in the gaming looking kind while how question were iOS us of well? that. that IPO. about what think we were kind Look, happened about in this of you related happened of on changes And question, have would of delay, QX obviously given as in how to we I how that When be should through were show? the trends are into look the then that had into would the normal road the have all middle about would that How as year be the on

to a a our On and may level, in that I'll a we was Kim view imagined have there iOS in would that had disruption did XX vis-à-vis and not little in Unity's changes we relatively the to there and in near-term IDFA, want occurred take anticipating Heather, modest, a would material very high dig level, disruption expect We business. be QX. high were be bit. that

what we As to the material user beneficiary beneficiary. don't to got believe you go the started the in each side. reordering that, advantage guiding that platform, we'll exactly a bit anything acquisition. anticipation an flux of a monetization and We a wrestle little a of going exactly We're And in with something and a in side on was be be And happen. somewhat entire then a we of fundamental no, And means market that's demand seen effective haven't to market data relative there'd with as shares. least less at we net think how a it's we've a IDFA. feel view platforms bit we Unity was we're be would GDPR, the did us. what side so ourselves was analogized advantage situation. sure platform, less to on for the anticipate materially not by material But net per that data happened And the believe issues where impacted we ad that

of gaming the there's terms In there's increase question of an usage. no industry,

would in not the it. is that on a and go talking doesn't yesterday increase twice. and to in Kim one during example. we terms that they aggressive just our a of operate of home for see as home, can't some modernization, things normally would They're business, Now Create have Thanksgiving the side, of I seasonality, effect Christmas all already It material were on home more be affects particularly And the -- about consumers QX of also a but holiday. hosting gamers lot

be anticipate a time little QX. directly as QX. twice. of we being suggest And maybe hard would because that in attributable Kim home can't we that consumer more that QX, how yesterday And school, of much basically and it's of pickup so it and seasonal get same we to home normally in [ph] pickup as a to game out into put bit would be see lift benefit with have analysis pulled in the A conversation we as people a

Great, thank you so much.

of any that? Kim, anything to add on

I don't think so.

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about now the opportunities you growth a the quarter John, of war big us overall investment or successful the investment understand Great. no priorities? of out how impactful your Awesome. your capital competition most set? larger how changed is shortage on And approach Can gate. the Congrats help have you of chest you the you IPO exciting just ahead. post What first maybe base are view? opportunity and areas as think

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Lynch, Ryan Merrill we'll Ryan. to circle back at Well, Mario -- are America of Bank Lu Okay. on? at you Mario? Would Barclays.

Okay. There you go. Go ahead.

have a guys, and one John for then out on for question the I a of first is shorter-term Kim. longer-term congratulations and quarter one Hey, the thanks gate. for taking more the This

those I give the But transactions? with capture, model mobile license do So you remarks. know Unity I Unity you will little share, total on Unity to of revenue gaming just stands in Kim as in-game how the this a touched but allow kind seat But model. business larger is, business you the games get most think in that questions why the for much economics And a appreciate Board definitely perhaps command her bit space prepared not of benefits. we consideration to one ad really out about common revenue, doesn't developers? a and by the

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Appreciate it. Thanks guys.

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Mario with you're if Lu Barclays. around. Mario, Now

quarter. Great. questions. the thanks And the Congrats for taking on

first the is So on gaming. one

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on as think so society, Operate? How I should it it versus it of And Create platforms? think the Is think monetization Is about and we the both? future on games on Is -- I opportunity about just what's Metaverse there? side? the how

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Okay. Brent Bracelin?

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go from when QX, -- so improvement. an And look to we when QX we you see

out and also some growth And go then saw you within verticals. QX, the machines that drive all really pretty gaming the period their as to we was there to high-performance of added food they get on to our developers from verticals. in a finger QX recovery adjusting applies the recovery. particularly And we But we pipeline, portfolio, there that adjustment a helped to our and as to We To was more It the into a as time these do in that saw the there world. where were by homes. to get just seat question, And slowdown developers of sort had slower new how bit your an in where QX growth it really complex saw was QX, was to close. both verticals. COVID deals answer QX was this And side, larger, and both. gaming we and board both new gaming to figure across and were

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Well, I have think growth. strong we we believe will to continue

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you. Thank

least, not but Tom Roderick. last And

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Multiplay, engagement some really But add-ons the to logically, end helpful. Kim, lean I and go it way add-ons if totally next even year, side end engagement into end of suppose accelerating to I'd of how can't. so user Should as adoption if some great. of of Vivox, did components sort those bit That's little next not? Operate understand it is year particularly, customers as think a think up, is not be year Outstanding. Operate the your I sort working about those back engagement of I we the just on user Operate, That's understand more? Operate this the that the to interested goes if does user of that how about angle going accelerate

Yes.

platform. the guidance not I of for strength Operate of optimism think, the the we're a lot but giving year, have of parts other So next in absolutely, we

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build to of products other So growth. And portfolio continuing of those then importantly, out are vectors that Operate. within

cloud released, and content delivery Yes. We some traction good we're just early around example. an getting as

example advantaged. continue also with to of in we So And competitively another services think dimensionalize this new we're that where that's are large markets. large a market we

out time. Are kind we're to think I of we of not close?

would thank you Yes, But want in conclude, months. see the very guys And -- that's it. be you we'll to And three much. if you John, that great.

you, all. all. It's Thanks, great seeing

Thank you.

Thank you.