Unity Software (U) 10 May 232023 Q1 Earnings call transcript

Welcome to Unity’s First Quarter 2023 Earnings Call. After the closing of the market today, we issued our shareholders letter, the material is now available on our investor website at investors.unity.com.

Today, I am joined by John Riccitiello, our CEO, President and Chairman; and by Luis Visoso, our CFO.

Now before we begin, I want to note that today’s discussion contains forward-looking statements, including statements about goals, business outlook, industry trends, market opportunities, expectations for future financial performance and similar items, all of which are subject to risks, uncertainties and assumptions.

You can find more information about these risks and uncertainties in the Risk Factors section of our filings at sec.gov. and forward-looking no statements. vary or to may any update results we obligation take revise Actual

noted, speaking As reconciliations. to both when our financial otherwise filings GAAP prior describing and will in quarters, shareholder provide non-GAAP measures. we our results. on And letter financial sec.gov the non-GAAP non-GAAP to are The providing we measures be and unless GAAP full

Thank Great. you. Okay.

of to So first John over our let results. brief some call John? me for highlights turn just the

QX our by with and pleased of very to are we off a I have start look our get about to our they to And job great just results guide. a Unity, So happy all fantastic start done us colleagues in want at thanking XXXX.

our synergy reflect strong Create that results, main businesses, Now these between Grow. two I great and to numbers our have say

We really true day more I parts. of by mean get platform, us the is than something are what every platform. customers is that sum from our a And the that

They would and get from being this truer it’s by And wins. and more truer that that’s and from Unity day. value proven customers individual win the products than our they

great on can profitable us all place and we Now Unity in serve way growth. a be a and our allows put to strong where path creators continued a of to this towards

you other know it’s you I read there I on press long in is every AI. conversation that It’s letter, obvious a And certainly question AI. Now everybody’s or think a our subject mind. about that’s article, shareholder every saw

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waste AI or come tools we and to will live about to come quarters to worlds were benefit things future. uniquely nature These twins couldn’t more excited able creators our and seem and a for. of tailwind from coming enable alive like are and never in years digital be content where very to The platform our and creation things strong make possible we us

you, thank being thanks everyone, and So, for here.

Great, John.

going bit, like So are get with but a we things like on off call let kick always, just are questions of me up open couple maybe that to to investor’s in question-and-answer rolling, the the session a minds.

balance quarter And first the look, The books, in Luis. first how strong with does year would be look? one a for the of the

Thank Hey. you, Richard.

You million We team. high was end was the as guide first first beat $XX the by are It We XXXX, $XX beat execution it driven frankly, the the said, well. strong by million. EBITDA quarter. end of million quarter by right. $XX And by compare revenue improvement. of as the if John And the high EBITDA strong you a a of guide Unity to this that’s

together well ironSource better with the Unity between share are market. than practices reapply very and starting The we best pleased also and are and that we and teams We working the performing are believe are we integration. to teams

So, it very quarter. was first a yes, good

profitability the But so your Well, to balance and expect back we does question, growth throughout to accelerate the look? how of year. year the

still for uncertain. full volatile all year, And for we both are environment consensus and and is the news same above prudent, read being the QX guiding I and revenue economic we are We mean, EBITDA. the

still did million EBITDA end our market. than perform of you expect committed by better the is raised guide So what $X rate to we we the run did $XX ask, and we end end And the the low of are we XXXX. million revenue billion of low guide $XX to and raised while by to we by EBITDA the continue the not

you, So, it to back turn will with I that, Richard.

did you a a kind emergence your then if how John, it of will of to bit, Unity then tools it discuss little And everyone. Q&A platforms? maybe sees touch just bit for of on Great. And you in unpack up summary. introduction But a full the open kind and we

Sure.

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game do that platform more developers digital the and will on development and twin our the So side applies to side.

and We of part platform AI. that interest of lot a of because are our in is seeing

have We interest shares that is seen Board. strong, are very our across the strong always obviously,

So embracing thing good our a it’s better faster, cheaper. produce content, in developers AI better, always That’s to world.

possible. The intelligent. of where And this ChatGPT, you characters when second is were games before a is It’s do exciting. really it they they and speak aspect to that are this they gets like never non-player in things that, do can

just an so drive have also what heat, growth in I results And writer to going dialogues They they gaming that side, is point the think, not a going to inflection compelling freer. are scripted from are to in They ambitions. that are worlds be gaming. actions and it’s their

have same was What is difference. that now to of in and twins we get felt idea our advantage. always that shareholder we makes digital digital big is a and we a AI-enhanced real-time The real-time to this about second letter. that wrote Real-time aspect twins applies

the you is run is and your for airport, factory now do to next, run gives a better to that business. building, things a way or their to really at way, us better a in people smarter just better, a what future in the teach least that catching up are looking faster digital a more better, you gets enhances better to using airport design twin, What people necessary you is, helping which to moment, but a not all

great feel we So about AI.

faster developers better, going enable help bigger, be never to are to We possible able and things going are them before. do we were to do more to

you Great. thank much, Well, very John.

session. on So the now let’s move Q&A to

hand quarters, obviously, raise please video. first Matt and will your your at think we from virtual on you remember, here. previous process time into And question call your came unmute on with if I Cost, As turn can microphone the unmute, the and which him we pin

Yeah. me? you hear Hi. Can

Yeah. Yeah.

Okay. Great. Thanks everyone. for taking the question,

So I just questions. two guess

letter, was it one decline with Thank first decelerated having that do strategic a Create, But then the shareholder to have The what simply, and lower there is apologize Create was was to misunderstood of Create that one down the follow-up. And I reason on partnerships. just I if to and I it put in reference but to you. inside guess quarter-on-quarter? I cause quarter-on-quarter

you is letter Yeah. Matt, tried to what in a the numbers. few do we shareholder provide

So including strategic the of is growth partnerships. XX% Create,

As perspective you we looking XX%. of partnerships without the together. we said, would are a Create the be and we also at businesses what provide But that

then and to twins. number are on we really our And what is that’s the driven Professional have lower digital in that by explained you we we bit we past as why seen a little drive than reducing Services reliance

super drive and industry SKU, us launch talked We the industry we that will are to about the that which enable actually -- excited even about have business of faster.

over a we churn want actually clear very I time. the One Matt. low really are sure make a reason, It’s on to that’s improving rate. points. are is few So seeing we

So we expected. seeing exactly as pricing that not all is are and at the issue benefits an we

me that bit a little Let add on one.

-- of you business if growth. XX% ex-strategic So side the

a issue One has in it of simple previous the is, quarters just been reason of bit a frankly, numerators. number and little is that lower than denominators

and period measurably So fully the we XX%. are higher in would growing in now what have denominator base It we that the are base. in still without the be

about customers, is thing you those revenue AI associated to associated in, are service, et is second new to yet in. new part talked introducing streams SKU cloud, with a with kick The we of a whether yet kick find key which ratable Create. a is have The lot cetera,

are we good we way XX% the optimistic. quarter. So very is reported standalone a

are of are the quarters. things the in from on front accelerating all of basis here excited the of in about couple next We us that coming

much so one Grow. And Thank Great. a that. just then you for on second

I would area initiatives specific up year. in I invest Is sort throughout And in mentioned particular, LevelPlay. in expected letter upfront think accelerate there maybe see the that signing you there? share? where new about strategic you you that an market to you out any curious to the call to am that customers the gain Are ability of

Yeah.

on is Grow, question Your Matt?

Yeah.

right. That’s

Yeah.

Let me take the top of that.

performance bit networks. initiatives. brought One think because have year-end. is more not enhanced is poor network Unity up Luis same hopefully am and data, ironSource I little today, the a are you seeing watching the both combination on strategic a of has data Look, of today, the break more I we

the between and networks and Create between also Earlier, mentioned are. Unity I is seeing we synergy Grow we really synergies Unity now together. that was But of operate seeing ironSource as are were we important couple and ones. A which had Grow, work what

strength and The of great couple are network-wide. historical getting of stack. for applied are years part of now what neural bidding side have networks, system is an getting header technology the tool of And and strengths are on a the the AI also being we understanding from out we been from using is we we seeing that Unity ironSource enhancements

around which increased the used mediation, whole is a onto driving gains result and to applied us to a what right the technology to rest do and thing Unity ironSource. applied benefits what now transitions now initiatives, that, that’s to used the of best there’s previously ironSource do of in but bunch So of were then data of was as is Unity

have about drivers, are share of because we we year, growth all and mentioned, least for the balance the feel are see and These so good very we to market at driving as gains far, these expect QX us. QX

share me we any We market treading about about nothing than way great. makes that’s at point, other and water this are that. gaining great feel that essentially market a gaining There’s in feel

that are things already mentioned happening Matt, now. And these John

a not are happen We quarters. in them expecting few to

We are starting the benefits, as already to mentioned. John see

Okay. both. Great. Thank you,

Clark Lampen.

me? hear you Can guys. Hi,

Yeah.

Yeah.

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or lot for cloud we does is servers. workload for building workload the tool that like tool, AI lot tools, cloud, expect place others to within example. Unity’s example, I a in What in of are Unity around it of the addition SpeedTree, services a causes Weta But on like, that,

developers richer, see add ratable and opportunity to start to lot use tools as to world. revenue complex our AI advanced for us more build I more more and of So a

onto pricing expect more level. I this what revenues usage. the in for come off in contracts So the lift their as will year revenue balance new customers our added year, kick later That cloud pricing this will prior of

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set We to engine a computer console. there’s which We device tool have or PC handheld there. a an on or or Barracuda, enables the that opportunity in announced is think run inference a be

but to can course, our Of use AI we run this servers, want advantage they them all is a other big work. local alternatives Unity of over for for type

Thanks a lot.

Great.

Okay.

William turn will Blair. Dylan to at Becker We

of moving kind you Barracuda from one Maybe now as guys. some efforts wonder, have have for kind what another interactive are called delivery, out on AI, give these personalized mean you can Hey, to the couple guys lessons tools the XD, maybe or as that in it. but headstone any led that to of again, embedding and seen, creation out, AI Yeah. form guys I of the static generative other? I content platform, can learnings more appreciate and parallels piece. you already there John, XD minutes call transition this that within and you you of

talk Wow! more. or that I about for hour an could

some let me make so observations. And just

how do or there you current language tools degenerative are work. allow the the to either So that art that large models out

style you based and what or fits a examples it’s bike want of prompts, describe a fits field XX if of go, fit a get things, lots or you a the give want me you best an on very you and you or study that not a X dialogue imagine. poly of want or picture or a wheat to band and hard that script a asked best and represent a either you best they for answer to girl They then for on

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film going comes of are some the see out that decent to You work side.

the games Now here, these very different. I really make for different, you games observation are would are

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I the quick of it. depth one appreciate for Got Maybe Luis. clarification there. answer the

capital place. the financial here. the looking I I guys On guess buyback about balance in allocation. the have thinking at you know sheet side,

there. guess, margin ramping the on I a any $X roughly Thanks. we converts of out You thoughts capital in profile, are got allocation? as billion have about kind just

we what a we time, there to similar market last out are is looking credit at Dylan, Yeah. crunch and the talked there.

bank. $X.X cash that we We the but to we are we be prudent. would billion with So very year, have be in want this happy generating

there. So don’t dramatic expect anything

guys. Thanks,

Okay. Yeah.

let’s Goldman go at Gili Sachs, to please. So

even though Congrats thanks give Hi, Thanks. results break on on around everybody agree for Kash. on everyone. I with for the guys I and question. Gili it’s non-gaming around taking the guys my my industry do. very you question we the a the you into AI, will waiting are it’s of and that all tune health more exciting is But to or -- motion. call selling what the Yeah.

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so you much. Thank Great.

will We Credit Stephen Suisse. to go Ju,

Great. right. All

So I train wanted your want to AI comments. on to get follow I up us back here. the on just

have call run should by had answering AI. we think I this questions ChatGPT. To about

Yeah. Yeah.

I right. give Stephen, back to it All will you.

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that to and all are to Unity what which think at development game number sound the like the the Create. one-man makes prompts get interact there all with for the developers rider but verbal Editor also around to longer the driving company, here of describing get of content are us number It does is creation. term can potential creators, So who you the but going the about increase decrease we from not once, a want I has potential maybe the this

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you. to So and the about the for Thank OpEx EBITDA impact talk dollar you can year?

think, we several I longest in had there that’s the So, for quarters. have question

Yeah.

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sort and And built sometimes runner of successful some two, most games by people. of the are games type one, puzzle three

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