Unity Software (U) 26 Feb 242023 Q4 Earnings call transcript

Welcome to Unity's Fourth Quarter 2023 and Year-End Earnings Call. My name is Daniel Mir, VP and Head of Investor Relations. After the closing of the market today, we issued our shareholder letter. That material is now available on our website at investors.unity.com. Today, I'm joined by Jim Whitehurst, our Interim CEO; and by Luis Visoso, our CFO. But 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. more Factors these at section find in and sec.gov. can Risk the of you information risks about uncertainties And our filing revise Actual no statements. and differ, or to results forward-looking update we any may obligation take

A during to sec.gov financial non-GAAP measures the done a performance accordance These substitute prepared Finally, financial on or Great. non-GAAP superior and We letter we shareholder our with and key similar GAAP. addition questions we've in financial meeting, do in will we'll what discuss are get inbound we two is and non-GAAP full questions. in website. today's to now GAAP measures. the of available What to quarters. for quarter, in during is start a reconciliation not of like will measures with number previous of

Jim, Luis. to one first and then second the to The

Jim. question CEO of give Unity take first on is the an So on X also to you can months your us update kind here, and After provide search? the

Sure. the can't I'm now when have joined. excited I even of the minute more almost to and about back been Yes, me I But a of maybe X just CEO search so spend the to believe a in reset. then in obviously talking than We're I'm I midst why say come front us was I opportunity months. about let optimistic I'll it's afterwards.

right us quickly interventions off, just term. but position of let win long the first our we're three just to And making hit customers, today, the So those. for I believe for to not me

and confident we're for that road maps our to focused substantially value on product attentiveness feedback. their therefore, the our our we customers our in hearing From customers, great have to unique have And games they're permission focus we've We're and products. win. our needs. off, first seeing So portfolio

months, that cost Same been great our view direction of customers but positive going And we're in Capgemini, healthy the growth we profile. improving models, the feedback so data in our side and process stronger repeatable several a few forward. around there, And scale can our I've then we've very us heard software way. partnership see what much And from structure there. with profitable last accelerating doing instituted We've not and leaner through in our a from focus the just on announced that focus. on acquisition specifically you'll confident from industry also grow hearing in of the we're growth we where a use better really provides third, business and I'm of user in performance particular,

a The that while year second was obviously key Yes. reason We points around franchise. optimistic is saw the us. durability challenging XXXX some our of I'm for proof

our China, with to accelerate I'm second but editor in growth next and super meaningful to a continues part the And Board we are the to started, to story, chapter pricing make of a to have strong games year. And first supporting change, believe the leader the even decision. course the sure super final grew that, So the the simply, fastest-growing expect next in Board thorough industry. Board's aftermath in subscription with is update. and off, I'm To of we financial through November, the our to have conduct saw Capgemini we've then our excluding we in this the customer there. progress, And QX. with The obscures it QX, and I we our XX% segment, the was and optimistic are Put potential the best work industry, the even And process further actually essential reset editor Unite of plan of it back through and just the with at be business, gotten committed see long it core our we growth We don't our finally, partnership question, that continues there. this exceed engagement very should of strong. reason expectations super, releases write year. financials the I half obviously, continues Unity's to of to our the

Thank additional reset? you. the you for following you. provide on direction the Louis, this Can question is perspective company's

short what period Daniel, accomplished. thank feel proud lot in success very We going said, a and forward. James Unity actually has absolutely. believe this that accomplished that, just we we've for as of of you. Yes, time, intervention positioned We've a

mostly This our end first all XX% on the that sad portfolio, hard achieve as made back Cloud the a resetting And news return company. The we contributions cost company and new generate can phase the them We work while can them win to started their a good goals. of customers structure really for phase is our see our are at Engine, had that behind go. let us. to and resetting to many so about businesses, unfortunate result, go the businesses where That's The with on is narrowing a our shareholders. for customers that Unity sustainably value and to super focusing of our X-phase was their investments we we is will businesses. X these and consequence refocus core all we we're If Monetization we customers employees many, enable you of colleagues. for us last reset Phase year, thank look that expect we create believe both about on first sustainably help this

reset. phase second with is that, the financials. news reigniting growth good actually the This year. that is starts this is exciting of And healthy about revenue the what's Now

XXXX after extending maintain revenue accelerate the half levels revenue and in and growth to expect second of We maintaining growth our profitability. attractive of while

you. Thank

go second the on So here part Q&A. now we for

screen. bottom if housekeeping, ask raise on wants the raise for question, button a need of to the -- just to hand you So anybody hit the the

now here take couple of we'll put to a questions. So for people seconds in

Okay.

Bazinet Jason question So Citi. from comes the first from

unpack if could just after wondering portfolio just recast you review. numbers of sort the a XXXX bit was I the

$XXX I to the in million EBITDA down were there. then understand divested that And came came the I making, were, think read things real you of EBITDA million. to then down and the the footnotes, some if loss of some text in they number it but was the tried revenues $XXX said but there no

can recast you So the a adjustments? those just bit about base talk little XXXX and

follow these Yes. not We it's to know all easy numbers.

letter. we on a our put shareholder So table

revenue, obviously, this the FX, think is, example. gain thing from that in We I show we onetime right? million first as for $XX Weta had

in table, a EBITDA. see that you had which in So the million $XXX benefit

into because that's onetime gain. take that So a to account you have

precise, The that $XXX million alluded Grow, of in thing changes Most is portfolio portion the to, the that small is second is which that's Luna within to XXXX. be you million a business. is $XX Grow, in

million and third, but $XX EBITDA. a the credits because which loss, our it's So a we're explained us customers. We last we in it's very businesses getting you audited, that have have shareholder is exiting you And for operated that not to quantify we're these was significant which that could the that in that breed XX-Q quarter, create revenue $XX we take why in value letter for mentioned which a you significant million at into did return in and not customer not this because we number of. account to providing while

the start look $X.X in we're you and really at So and in $XXX comparable billion with that's building base EBITDA, revenue if for what from. should 'XX, million you

is Dylan Next Blair. question Becker William from

Luis if Jim for squeeze maybe and first, I here. Two could a combination

business of wonder strategic the of nearing investment catching getting rid to thinking kind end X? right what's about And review into of the about point, core, kind also growth of the up time? over kind and that how kind of margin earlier around but think of doubling how of about the You're trade-off maybe kind way as down loss-generating some we in businesses, the outlook the the you're Luis, on kind layers of of thinking the of the

Yes...

be all we've start getting appropriately focused we where try this, the internally portfolio sure we just all believe that portfolio to making core on then through reset going win. resourcing we of that is a along win and I'll Well, look, on, and consistent is this can quickly to the been we as are

And fully so optimizing us ultimately, areas XXXX about believe there we lean exercise is the and growth that amount win internally about EBITDA. resourcing getting and was tremendous efficient company. a wasn't It this of was we the because clear expect to in

want think this. So Luis, you about more to talk i a little

you if the the us I And just customers. about totally priorities that it we agree, totally to to or we doesn't are and in half we being right return We levels. could our funded funded generate make fully sense. had those think defunded, we didn't a just those mind, Jim. Dylan, that pregnant, the is for for way think wish

reaccelerate about those that growth our So we're because feel we that's to why matter. confident funding things ability really

there. one... maybe And Okay. Great. then Super helpful

ourselves. Dylan, would If a have as I company gives and a think be see and that that, year, our we're, should say generally mind, where of for that I I roughly way we a kind this Rule of sense on XX we exit just, of mean be quite while. the of you kind

Yes.

some how but maybe Appreciate of kind XXXX and of you features kind more we incentivizing of year fuels Unity that I kind probably upselling. that as well think new Maybe conversion? around Jim. X as momentum the investments type the you're platform pricing the of how the story, How this of of mentioned the and thoughts accelerating there, on X? kind guess, It's well. throughout commentary and of Unity color about platform back half should Okay. a of of too within kind

and so the to are more X details I'll far resourcing a that, lot well and we go hear you'll And come of because, start. please Unity we X too Well, detail. GDC, won't both frankly, Unity

of offering. talk about are at So road heavily our think a we'll do our that we of here in product maps GDC. And that we core funding weeks couple kind against more

pricing of we're kind how that, about of terms you're a story. right, XXXX In mainly against of it's kind thinking

the see a numbers this it portfolio. think I that in say this lot organic is of year. What you will So doesn't growth really we there is affect

more the we're just that have suite talk that offering. for price. raising out So on haven't about give think XXXX in position long-term we to can any our reliant really when But offerings stretch. growth, in beyond than product I quantify kind there's kind we future of laid a do we industry, pricing could current in our with we games kind more that value provide in of heavily at we do and has you But leverage. look of way and more our when not

saying. points Yes. Dylan, is maybe to just the of reinforce things some two Jim

core growing XX%. business, is China, Editor, our saw business, our You that that's excluding subscription the core so

levels or and new So very being at growth, healthy engagement, of we look projects started. when

be very, healthy. to continues the So Editor very engagement the with

And our So we're that. AI interest from great our tools customers. very about in excited all there obviously, is

So they are, they available. are, the now is Muse

making, using are and the happy progress they it, we're Dylan. we're So with

Brian from So our question Wells is Fargo. next Fitzgerald

follow In that letter to fees? little maybe the from that release question, Is about? bit? and in growth out just is Is of talked you X? the shareholder just half it reacceleration of on of there Can you the that a year. maybe like second something Or the else the parse into industries Dylan's run-time you growth Unity unpack primarily feeding

Yes. an impact time nothing second meaningful. fees have does run half in not Really, the or the

bit the are acceleration all growth back-end competitive ad little we see excited we'll some make performance, our that products we confident on about product data, spending. why reason across talked more of the bringing innovation that about on and return our to lines. we're bringing really a innovation Jim are some is So

the of businesses, both across So in so we're a accelerate. industries then innovation our And where can business making expect interventions really there it's to games growth. accelerate both across and It's that. that ton we

reset. only Yes. we're would in would a middle of add I The say I is the thing

the conservative obviously, be so half right, are And that very because, year people, distracting. we with gets we in the especially first of were when to pretty dealing

forward you're we year. And expect of seeing is at kind so go another of as both. we're It's we pretty kind and But look of where the market reason the half the just first conservative in that. we

bit in it's you finalize will to but more confidence half, back that half. year have back now if the reset. also the at as right little behind There's an distracting this we first We get we look a assumption half also around

and going what real-time about, competitive? we're of make and develop sounds business of to it tool the the when And was talked kind the or it how bit like runtime the rolled you developer a of sequentially more down, of what's side on out? the in fees were that growth growth And, business about sets informed it the growth as happening little more is content a well. you're there's talking with to is just more kind being debt side

as We really both expecting but that it Yes. XXXX. by not mentioned, didn't are into right, businesses very the impact. was of an mentioned. guiding we're going as impact, the in year There much for not you an Jim throughout see But you're an meaningful we was improvement reasons in yes, segment

bit on a more little guess I that.

Just a lot ironSource on were year, we less with you when Unity. of maybe doing of to last little And become be happens, blunt, frankly, velocity. focused a kind that driving feature integration

do I of us. now behind kind a put distraction that of bit so behind. think level And us That's

confident we closes have teams have. any integrated the in plan have and we're We gaps think that we a very competitive I that

the half growth the numbers So the of and reflected in that's year. in somewhat back

Great.

Tim Macquarie. Nollen is from question next Our

it then last segue noticed big anything like talk perfect talk bit a acquisition about made? some million Could And immediate the guess clarify you ironSource just you is the there, that? you feel I fairly the an my have Actually, bit integration in the could more little If completed I've credits. when from what acquisition. departures which was ironSource. about could not like was Great. name from there's sounds just $XX the you about you question integration. about into Now

done Just, LevelPlay is on roll is was platform then being day? that in back the this And that to something the unwound why now? to people

first work need two make business the have to then naturally, you maybe retaining the together, time, off, that sure you come together. when bring the companies you're you a and me let mean, Well, right people, I continuity on start of over stuff. pieces

on that that we of the last January were as And say, as end a the our integration into overall of full of of culminated came ultimately year, through and of year so kind working kind course the we part of at without, kind restructuring.

of bit more So a functional we're organization. a little

time, Commercial we both we have ironSource. And So across for for leader of first product technology kind owner CRO a the and across or and business both. of have the Ads one one Unity of

engineering one. had January. now of data one. So teams We until we now had data teams. different science kind X X We frankly We have have

just naturally, about period you sequencing acquisitions takes a so time. And of of think and kind how

single serve And well. teams so are singular we focus like will there and feel now, we these us and

of ran step and for of naturally, to room As within back kind to and come the of part that to founders people create take who kind ironSource ironSource were ready in roles.

think And as but many I it so to back. as we part of that heavily whole the decided of integration, every they for talk to their about Unity and and care more obviously, of leaders success I was They're baby ironSource go engaged still step those forward. time week. broadly

question, the Tim. To your part Yes. second of

those some us, revenue their as now, So we've that time right? there recorded some merger, integration communicated the incentives were we for year. returned And provided this to ironSource some the of to and were before customers fees those throughout

had wanted transparency those So amounts that what sure is all in we to you all make were. what

that quarter table for included we we in Grow. by show So a where on the revenue

fees the the number of from most returned. reported which $XX the only and Luna were between So is that difference basically difference that spreads our year. is throughout consistent The million integration

Unity. to else assume integration million the you million $X fees that is were per So to quarter. everything But related returned to can $X

in exact the So just we're you -- have base. giving so it number you that it's

So next of Bank question is . from Michael at America. Funk

Yes. Thank questions. the you for

could. So couple a I if

fourth guidance plus predicted higher the exiting said Looking the seems I XX% quarter. could mean margin it year the at by that EBITDA trajectory think margin and the fourth year, imply I would throughout for a revenue be margin like quarter. you

is away that benefit reinvesting if count going curious in second the So just into back EBITDA the maybe on the business? head the the, or is reduction the half question margin. So first

be including we'll Jim Michael, Yes. mentioned. guidance. our

to back want first sure one meeting. investing as during also back properly the We we're make that to the of questions

be year. to close we company, We we the the right balance. be the So towards we're can end to that Rule hitting of XX want think a and of

get that's we're a at as expense but we're achieve. So But margins we driving growth. hard, and to our cost And the never you've to what driving, trying path efficiencies there. see clearly we're seen, of

Okay.

XX was, by that correct? of comment year. end company the Was of hopefully, So the Rule the

be would our that target. Yes,

if could, shareholder the then business. the in on And mentioned the you Okay. that letter environment, last intensity I on please? one, comment, impacting the you expand competitive competitive Can

side, right? our some report environment, I Yes. all you've seen mean on of Grow just competitive more a intense seeing competitors numbers. the we're And

Some have better of them ours. been than

as brought of And were the integration we So and know the work, plans more intense very our we [indiscernible]. those now of busy in said, We aggressive period the very strong. what have and it's have been to just close to time. some and we've we short are, Jim been has market innovation doing a gaps

towards. we're working So

in that's the So what we to referred note.

Our next UBS. at Kuntarich question is from Chris

first the business. on Maybe Great. multiplayer one the

shifting service we unpack bit? Managed thinking profile maybe You guys margin and talked to forward? be Solutions. you Can just how a then should about this Orchestration And going about this the just

Yes.

about offer is where If our not where that's is, a we And two really, That's kind generate think of competitive Multiplayer that, the not our hardware things. think we return. that's had we strength. prices customers. good One business a you a that have can about business component to not our of and the to scale business,

we're So the of a orchestration that, trying value it's not offer games. to multiplayer that said the game, do. exactly hosting what we layer of unique in Having what is

value out that's of provide not we're a business. as business. business, provide said, our just to just that's we're profitable Unity the for to i And our not, to that because, getting customers. unique can hardware uniquely going continue business we're So we a to to that in That's software something be That's customers.

of space. China. gaming talked Chinese one on And maybe Got curious, China, just it go-forward been within heard and you basis? ex follow-up know about how you ad this kind just opportunity I about it. a Can the a in XQ performed on for we've Engine. a growth the of source has the outperformance. had you just bit for spend just across talk But Unity The

Yes.

China business and Create know, Chinese to mostly in in right? market, customers different business two we restrictions continues as That growth again, China our that games to ways, China, some developing which have well China. tough is you business are in also The China growth just think business other growth, impact So has performing reflects there that been outside in about our the reflects customers in of it but any specifically. China, things, in Create On our Chinese-based has doing like region. been in

been there. we've growth good seeing So

Great.

Next Securities. question from is Andrew JMP Boone

Capgemini Can you then business? else we anything trajectory the my for industries talk that think all second, nongaming partnership. Is for about your do down whether professional there going about or note the and should the portfolio strategy in change at of services And slimming any changes the how we there?

there. start I'll Maybe Yes.

a So like, obviously, of because goes look, revenue services dollars. lot is professional down

we reset that's of So, the why but the we, in kind numbers. showed

enterprise come from Our frankly, anywhere has is from of I as this other visualization. kind no an And much how we our with been right solution that's at much near get been how us goes is. what blown away compelling background, And strategy, have there that offer. from I patience frankly, because as can there interest customers there

with to, is you things, AR/VR. customers back in those that a not interacting with or end with you building distribution, So, product content, talk that things one companies, way a very right? the whether customers your go the infrastructure see how configuration because as forte. of training to education of do through component often as obviously, our education Whether a you visualization I solution. is a way that things. There's building to you're you're way richer and partner-led will in you view a a of realize software these with of design is whole with component solutions all much market, all is can the connect But how richer So through

our with can And solutions, take business. decision a and maps partners company on like and delivering road who software double made excellent down a and Capgemini, that so and build working we've their be software that's to software

So people I feel and software highly have partnerships with and in frankly, scale on who confident that more solutions. delivering expertise focusing on building by

I'm will what you companies again, excited substantially about think at companies, if super it. Obviously, do we that software look if profile you Virtually a because infrastructure. heavily business. We and that margin a component visualization infrastructure about software software are But higher of it's partner-led. do accelerate as that all business.

so seeing that is strategy better for what distribution. in much move a We'll get And to direction. us you're

bring certainly get like much people delivering lot outcomes this can a better Capgemini working experts we more think Professional people get we'll in Capgemini, to who I scale. can more just And than with by lot solutions. in are we a Services.

software, am is customers efficient, I to are, but forward. opportunity that, we're their turning at tremendous our go-to-market industry I is that And a interactive company we're company, want not they're we that. to for solutions in recognize that our we're selling convinced think Capgemini vertical a it really going to solutions But better it that talking we know building excited build XD customers, a of to call an way necessarily of is they and industries, enterprise effective of customers. And about because the convinced absolutely we kind some of into building going absolutely So, again, infrastructure part out is non-gaming us again, that. for that software

Matthew is question Morgan Stanley. Cost next from So

on by up following start industries. just I'll Maybe

said think a letter be of it than I bigger that the you you business opening think gaming. paragraph that the in shareholder can

confidence in time? seeing industry are it then have subscription to I of use said follow-up. you're you cases the that XX% of get really level can that I that verticals you So it it the feel a think or strong in And uptake I majority guess, can from over there that you of have business specific

to cases. of not to it honestly, bit of sure I to of And have who Well, a I'm commitments take Yes. give start, names I'm a try out will maybe we color and to because, couple little actually their use going on names. use be the I'll able you just

let me real quick. do So, several and just

have spin there rich So who luxury so detail experiences so in want have they who all who is every they have, that where retailers their have can their see can can you it around our and in necessarily from performant people of able the you inventory can one are customers no real I this customers, so clothing, to have don't single multiple have a know products. store at of number are, spin use to time, iPads way the we And goes immersive around store But technology efficient jewelry best engine you the again, to be do product, but to in that it you time, iPad. have It's in there's Zoom can a we sounds zoom to to that can way real-time look are that's an do in. way according other these real to simple. somebody in, a that. enough just, in to closely. And on it

We or company. all have can of to it's "Hey, who it a or see PLM layer Obviously, there's We're whether want from saying, to and can it, widely", make series industrial have data available customers that those seeing the one luxury across the customers engineers go XX whole So that retailers on side, of end CAD/CAM that. different retail. systems. to system call we luxury beyond take visualization

on be can people around show the to real-time But able an want to spin phone, web or be that you able solution Now if or iPad when interactive $X,XXX a you to you a a XD. workstation, to that. best again, are AutoCAD we do to have in you and browser have

aerospace, markets. is And whether visualization this. kind in automotive, company those one with being kind training, and large was the finally, interest construction I lot a cetera, So in especially using of in that's industry, of to all types there's that of education et talking solution of AR/VR, us

worker you facility pretty VR used So site, sense have The of is in could AR/VR train want high for headset But a on training, and be of aspect like something in gets put that to training that's look. supposed nuclear they to on like a people. kind when a a stakes of power kind how especially of where interesting. can

think work Pro. the know Vision the of we're cases people about I industry's launch Apple the but to with of it. cases, I consumer some use the a use lot it with of excited on around for some talk

us. of obviously, for and cases. just there's have chains kind kind interest much from are those to so excited world for in those a phones. the We're why us types enterprises Digital reason like general, use about whether be web So real-time so player can of lighter-weight in I three we I'm it's player on and And as examples. But products more like is about not the interactive iPads it's think we're connected. more in And in digitally would Twins that's devices opportunity again, it more the XD emphasize, supply this. only browsers, who of It creates and do more

and big doing recently. what side, then strikes bit that been opportunity how a Grow between think growth secondly, growing it the there's their little the it's catch actually up. And Great. me very network already been to disparity I grow in on addressed pretty Q&A ads a competitor a versus they're it's for fast But that big public

specific or out? the close new to I Maybe in So that strategies guess, would call seeing specifically there are you're try you're landscape? have technology to competitive that gap focused on that investments you go-to-market that changed

I'll mean I little start bit. Yes. a

their I that's manipulation line, There's some are the those our science. help close investments and is increase merger the synergies agree in to Those feature in velocity I both effectiveness data some and those most to higher- those ironSource-Unity be bottom a the than data our But both So with fund data that areas. reinvest looked as make yes, our gaps helpful those to faster leadership of dropping capabilities. we've will there's of we of monetization say, our told sure incremental technology, a or to the stack best in lot kind investment the much suite answer you. in incremental getting at dollars customers product at completing to simply, bringing take to investments, data we of investment. those teams rather to synergies able are

over opportunity good long customers there's customers us really, That to want really think hear term" in this our and see a really, over we there. What win our want I for from networks. multiple I lot of to ad us space. So is, have "Hey, is

confidence go with work me a gives also space we to continue to which us forward. there's so, in a the see to desire as and real And us improve that desire

Great.

So last question from Daiwa. is Jonathan Kees

I'll can better still over would metrics you $XXX,XXX me? still we mine think how net Okay. going of $XXX,XXX terms The -- agreed over are forward given In measuring talked of right those Are you've about previous looking you number talk in can that that. at for previous the from expansion rate? you about be many matter dollar-based to Great. simple. terms customers. of the Or like in and keep revenues, what $XXX,XXX customers what looking Have, hear Guys, KPIs? be will you KPIs call, like separate metrics yearly a no what?

ahead, Yes, want Jim. Seem you I think there are that several. Go to ...

ahead. No, no, go

you that are time. over are there important several that with shared think metrics we've I

it's tricky extensively the think it's industries of talked are our I to customers because the the of discussed total indications. has that the and Obviously, business the size rate and given of think a good company. number net a is Jim that opportunity we've expansion percentage going important I number

indicative. as as not it's So

of both we've top many, made games is. the share. the community with consistently indicator are how games talked How the X,XXX of about the platforms of also think on percentage what I good engaged is a Unity market

industries. And metrics. be So we'll to keep progress on That we would add as view, across those my make we'll some Jonathan. continue more providing

you here. at you looking of this into dialing so to We're day. of forward for great upcoming you, some quarter. much seeing conferences the Thank everybody have Thank call kind a our and