Unity Software (U) 9 May 242024 Q1 Earnings call transcript

Welcome to Unity's First Quarter 2024 Earnings Call. My name is Daniel Amir, 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. take more Factors these at statements. section may and find in and sec.gov. Actual can revise differ, Risk to the of we you information any risks about uncertainties results or And update obligation forward-looking no our filings

during for discuss financial of or prepared measures financial non-GAAP we superior measures. website. to and in will in is available letter non-GAAP shareholder the performance GAAP. to reconciliation measures to GAAP are addition meeting, A accordance not today's These Finally, our non-GAAP financial a full on with substitute of in and sec.gov

Great.

start what previous kind questions key similar quarters. is like of inbound do a here. in get will done of number have quarter, with So We the we'll questions X what now during we we and

is is then to and Luis. Jim, first the to The next

is, the Chairman role the with recent to announcement the new see of going question Board, you So the your as CEO do Unity first and Jim new of how forward?

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plan me how of reason in ability terms the the I more severalfold our In long see The term say term, even am have the in I'd today, address short and short let year. business things say in guess confident I this I that term. the is the I deliver to that unfolded. as

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so And how, and kind of that. through let's of work it's a matter

really with the we're our customers. We board. super a Really, engagement conversations productive GDC. phenomenal across So having had great large

moving. not of highest are about the release pull time usage, and also and doing about the manifested have measures with Obviously, on the those generally year. time and quality the talked on coming in, doesn't business. the until and time to looks this QX. have developers the lines not both are work. going yet. We've obviously, the data analytics roll in release So start leading in we a very really, that but good saying our Those numbers out it's see through stage look yet, had the encouraging. of you'll lot interventions our quarter, results lot lines testing. the in And we later but to ever our lines, the sign really a necessarily starting that importantly, of quality the execution. It feel date and in. We're get downloads those at the around we've the done we're release finally, that's this side if good where pulled we're Unity We're On will me relationships good to at makes X, metrics, and Monetization a that But

make you the the confident more were all me all together, the deliver. in indicators our ability confident that X So confident to for over but of We in plan the put quarter, of obviously I'm our highly last last remainder year. months even

run, In long continue about I again, be to the business. the super optimistic

I relatively there. customers, where, our piece of the I continue customers us we'll a where still opportunity to in gaming. feel position side, of the customers' to our to even more be frankly, think and out trends over essential Industry us, There the a are Gaming, that's more opportunity our really see business. And are essential, and I obsess nascent think, We -- success, successful, about makes on I help that said, number I'm I can but the as more talking it is great for which

feel and the super So to term, long term, confident, about. short I much excited overall, more remain the both I

Jim. you, Thank Great.

in second the What the year? Luis. to the second revenue plans And to QX? take accelerate the is growth question is your So half are overall what on here of

that we I Thank lot accomplished QX. believe a in you, Daniel.

strategic year-over-year. $XXX very revenue was up X%, close year-over-year, in making you revenue and about subscriptions strategic grew income it we we're million with expectations, net if particular, and our good think up up at with expanding our progress look delivered like-for-like million line is with it, you to Create, XX% $XX core profitability. EBITDA in XX%, If improvement,

So And forward. reset achieved stronger drive large cost complex were completing successfully growth. and very we while great that revenue and to a results profitability this us position portfolio very continue much progress importantly, will as on going

retention business, AI customer be to growing making we and are As Engine fastest Muse Jim Sentis. mentioned, with tools, continue Industry rates progress healthy. engagement and our the and continues with particularly

quarter. very say good would So a I

our your kind of the is of is which conversations ahead, unchanged overall, quarter. second question, your looking last part Now from plan

value interventions on generate cost believe business, and now we're Monetization make quarter, focused customers and something portfolio can do create that sustainably we for we our the Engine, us, which integrate else. uniquely behind good better to Cloud, the can and serve the our something With customers than is that a where return we improvements Create, half very Games half deliver anybody we in both the customers. And expect Industries, data second to in continue paying our we ad talked last and on driven growth in from holistically, by expect spend is for and we subscriptions the be and in of second Unity performance acceleration return Grow, come our for our and to Create which to continue Monetization to better solutions models more on Grow usage in to our our train to progress importantly, better that shareholders. In

summary, our in say is full that potential. our now I we focus positioned, and to So believe execute would we're that very well

to other while I -- we to to remind go our focus you guide before business. nonstrategic help portfolio revenue we doing Now investors only. that questions, and like really this This that exit our for we're on would driving we're the business strategic is the

adjusted strategic you nonstrategic avoid though, report strategic see company. the those of guidance will which is for portfolio you our numbers: obviously the total adjusted for EBITDA So revenue, as portfolio. On the both is we're actuals, as EBITDA, not exiting when we giving as for businesses. well And issues. numbers one we're our to the portfolio This is reasons we guiding meaningful, we're allocation nonstrategic know, our

we that hopefully, can the So to clear, and back questions. is go

Great. Thanks, Luis.

open questions with here. So Instructions] [Operator up that, it Okay. why don't to we

Securities. JMP from Boone Andrew question, first the So

second I of go for half you wanted to back the that about terms acceleration. the of the growth in drivers just talked

Grow, in drive we solutions better able to from actually I what terms are just of you little what be talked and should guys for expect? think data. monetization And more about you you product doing of growth? Can usage bit a that that the to unpack perspective, then exactly of

Or... take to you Do want Jim? that,

start Well, I can kind and of can out. kind break of that you

portfolio. So it side like sound Grow on more said the of you the

So departments. frankly, we're with, before, data X operating as science different said we

ironSource were lot data of was kind we've completing data we the in organizations using. or of kind So weren't engineering we just data we weren't as kind fully whether what fully of year, those it's science. frankly of a doing. This together, of integrated brought merger, part There

now substantially are data. our training more models We using

of like one There's from -- sets forces, of into Android, able incremental also combining by multiple. sets, MMPs. And for we're there's different data various getting iOS, one we're kind out analytics roll there's against to We for are data those kind behavior there these around one of things.

as training material to things your these, on and of compare get run you and so tests, of you kind then And you test and et you and kind et do cetera. those one to and full you of each kind where models see uplift, roll see you tweak tweak continue the data start you cetera, out. those and And all A/B results then of

good. So that's the year. But things what say, of very X the kind pretty major of some go we very, least Obviously, specifics. have them X, that beginning of to of things are contemplated competitive, at or so Literally, we're I'd look I doing. all those about we at won't I the think

now think we them, of positive. results some X actually look X have super or initial I that

take just longer. others The

as the well, we've this more we July the will which back out bleed of in so as it of and the we through And be kind projected, of why will of quarter, the improvement back there. scale half year rest the those see year, half rolling at into sequential is

data. about add, there when of more are more data, last X just said we talk components to quarter, we Maybe as

we and data, to nothing we're models, first so it. have. actually to our do. need a that the train which other We The need on can, create piece get data that's and already we we There we we based can just what is to more our piece improve is We doing. And think need using portfolio, consume total competitive is that just advantage. more to

coming improve of as we're the working confidence back So half. clear we'll hard therefore, said, are testing, tests Jim those to looking X We're encouraging. in data. And improvements And our are interventions are components that the There see models. that are very that us in. gives very

question, Bazinet Jason from The next Citi.

just just drivers don't increase if guidance question had share a maybe I bit? year mind -- for I And full that? I did notes share the of a the count you count. the my the unpacking so, on wrong, but have

by go restructuring did driven up few significant. the changes, million. just we're it doing. It's a Nothing the Jason, all Yes. all

X.X% something like think than went that. it less I or up X%,

see increase So that's there. the you

Maybe are like So have wrong, numbers something. -- it my I up went thought million or versus I the I XXX maybe million XXX thought notes. wrong X%,

come Jason. I'll to Yes, you, back

restructuring really the that's it But else. the by increase a I year. driven we're think change. all was doing the small on Nothing ] [

Great. Thank you, Jason.

So the Michael is Funk. question next

but believe yet, today? AppLovin you're numbers mentioned Jim, more last initial you to the on quantification can side, and spend interventions not the testing on the you on Monetization ad Monetization they commented seeing some night, return standard for they industry what maybe a give the advantage have insurmountable on in us in relative clarity, side. expectations

initial And the on or you so ad I what you're return your testing can and hear you and with to believe and gap? seeing are, you on where love that that spend, where thoughts would you go believe close are

X if and you give want you I'll here. kind Well, add to Luis, of then in observations,

max people extremely of first these of more then had with we're kind of have results LevelPlay some to to large been some actually And some these we the and doing. tests, some we've are positive, things partners, of as off, So the they customers. talk moving

or say so versus of that we AppLovin. These our share, will the see seeing that way. much things relative to we It's extremely Are to equal these, customer interventions exactly of out, not And the to that. hard moving we we these kind on share but feedback close shift. gap we so lot been of and roll think are share in ROAS? are back has them us And actually to leads actually to the a positive, believe when continue

other I is, look, The thing would AppLovin. broadly say nothing against just

executing they're on all amazing They're it's doing cylinders. an -- job. think I

this hear as over one one of ourselves partner, to the have over and over scares now, and right That think look benefits and at I again. wants No people. one we we right?

of reliant you You what the share, increase lot don't your publisher margin, a charge. especially i.e., want versus partner, you on pay to to a ability, one you be just given what if have

competition want people so And there.

patient. we've being had of catch just We're We're a you. so And to up. for we're expecting number here say, customers

you. to deliver, here got You but for we're

situation is a with run not it's excited. everybody away So close gaps company are can where and People us wanting and a to this win.

these with a lot as those there's specifically we've patience So things, results these, of against things. through on worked partners where of And seen we've again, a good we're there. couple working really

or hard But spend it's seeing So of kind or XX% say impact XXX% XX%, the trajectory, see through, don't running as which the positive really very whether you close advertisers. what will we're various actually to because ROAS just we're across. we with these to to numbers gap is

benchmark So that hard to much, to It's I benchmark. compare can say.

Thank in the speaking by you the color, way, for you the very And and last good few with Jim. you to good role. luck quarters new nice

it. you. Appreciate Thank

the open let's mic BTIG. Clark next the question, for at Lampen, So

was a question Jim, that I that don't with sort you expected? And that and you Plus driving up? wanted guys of of some expect tell bucket micro understanding that's Just of customers more commentary moving around to Luis, of give more and But up underway. the any then, XQ. could to if signal we the seen us up that's segment transition be curious I other. Grow. start that you you of plans? at of Have us sort Create to both be to Pro one than a of one if sort there's XQ expensive you with Is on level, way both Anything one the to sort guide happening Pro around could flat? sort going curious bit early directional is segments Should the

Plus couldn't you the where our you, if Pro, I Look, stands. I to that on commentary. add don't some versus wanted Luis, know expectations, to tell honestly

sure Luis, it, but I would... versus, you not what how think we're out pleased plays that with I'm

are how seeing all customers which with Enterprise, is Particularly, way migrate obviously some happy better we're us, better customers migrating. to very for our customers. we're of Yes. our the for

top increase we the about we're migration on So customers of seeing of good and comes a took price months ago. up, XX that

So we're bottom flow through seeing line. the all of that

careful not year, between we half particularly but -- expect as I question, second -- expect, want be do be on fix do and X to growing improving, of gaps your also sequentially Grow businesses. would than the and the so these Create that had. I the as think the you we to Grow to should will be on faster, we Create in some second better guide really to I not quarter,

Next comes question Parker Lane from at Stifel.

wanted third time the or to significant scope that around delivering emphasize to is material guys products, so Capgemini with of the What is those is projects like? Perfect. partnership Jim, Industries' how is projects? something the this I Industries? a in know successful deploy party, that people that you shortening improving looking really for

of creation standardized through interactive Taking having think all few thing, days, chance The lot real-time Well, we a closed mean, April kind kind ones. a XX, any so of had use by it having cases, a in before, and solution your when vast but movie the extraordinary offer whether a We XD, viewing. haven't for will honestly, see a or don't this of lived about there. but they I visualize custom take last companies I that partners will product I software, to are is us. think enterprise, have for there enterprise solutions more most applications be viewer, kind an different to will and X business bespoke What we PLM infrastructure that's say infrastructure of SIs. common look delivered you that talking majority I'm of accelerate are tools be the deliver this true their who that's if customers. I

I So in have it. high confidence

April we're think I But literally, it. just we about excited closed XX.

those kind we an days or be beyond sizes enough of ] things, again, [ in continue optimistic. on it's indication give lengths nothing's to in but X the changed so confidence, -- last you And high to deal

Thank you.

Tilton Josh question, from Wolfe. So next

coming improve to you're a the I a the made products? how kind growth you your flavor, but us the behaviors it's change if want up these already are just of improvements these your strictly kind of just is, improvement's I'm understand question that behaviors half beginning, on somehow and example out, what second to And to the different that because trying -- just these acceleration us is of an want it follow from think I can was confidence in directly. use improvements customer I help asked few ways making, very And latter, these customer changing is a and to it already help for give us sense, growth? Or just to you're you've give today? a expectation improvements seeing just around

would end second yet Yes. showing up going be you to the year. I you at the mean not right? revenue, we're of it that are QX. back the until seeing day, in half not And Otherwise, the telling is of the what happen they it's in of end

So our encouraging. is testing A/B

show complex using and infrastructure we're -- improving machine We before. and just data, learning more as particularly our to of mentioned -- the continue sophistication I models

benefits, are a we're those not yet but it's they in So where scale our at just seeing up showing revenue.

you Yes, give little it's an to things. of just lot example. I'll try And a

did we ads, work improvement. made a some of playables on our tremendous performance the So

of customers scale that so to in us And see want a are have to are kind out excited couple with this particular who to we really working more of much and broadly.

bigger out as so but think scale. they're where we've trials things, results, when on real roll experiments that have these won't real material that data, things that, that no done they're shown that And done, -- kind real reason continue those to have at and live -- we of we we've are small,

where tweak to in the optimized just them. the working say, areas was would is a see [ little competitors. cagey want you we'll playables, see it where talk ads I you we things, test and material and you is it's positive full results. And want it we out be details run what it to playable that from to areas expect about like weeks test a these But a run real you and But roll ] we it throw want real before you be get extremely roll reason so various has "Oh, that at there," been results seeing we're for of relative like as run one. scale. because because possible as So me don't to out, let multiple the tests several we're as out positive, areas

you. Thank

Matthew Morgan Stanley. So next Cost question, from

right guess you're having with lot So of conversations customers I obviously a now.

institution are that thing of given script. X% be conversations I you beginning to advertisers think kind kind is of revenue, take imagine than kind -- how forth pay for of pay the less saying you willing value along you're paying what of that they of that those at good customers ] of what historically you lines as right an a the mathematically, going you're provide, with probably they your at stated a [ and more. I of talked One able industry. as Unity the to back and about are for the invest to of and testing and it's should they be the the in has it how now product about rate you much important understand you,

should them how how in about are in you? with that we, you it? your that How about guess right the pay you're think now, willing I we and having So customers the financial conversations to are should markets, think what dimensioning

a not your fixed of I'll conversations. fair about share you're have, to their about frankly we're really conversation I've fact kind because to pie To you. some that the start pie a is that. away trying fixed on getting our to pie Look, a giving lousy stay talk in of from customer to talking means been and those

how immersive, Grow is I do that we their how gaming costs, how around Luis games. And drive in that, that's it, about, broader how to games not Create can kind customers. bit less we our not a our when can to we're development can talking monetization, to with your internally, think through that. what games, market way with of success to talking you accelerate talking important build lower we a very whether development think by where customers? what in I conversations for to so we across to a do against we talking to better those get better it to them. improve about of it before, games about about start what build to paid are And we because the and games How the bear, difficult We're we're help have where we have faster, to ability it's talk success, unique and build more about bring area how kind about cut an and how monetize and you little think ability alluded becomes

not But So the way. Matt, answering question, we're about conversations last the I'm your turned I have months. confident asking directly know positive that how not I'm because few very it in

sunk "Hey, I to of how but I a do and way, think in do we only in doing we'll Overall, proactive runtime so, so in kind is industry way more profitable?" And positive deserve more." of find kind seeing bit of gotten partly, conversations much much attitude. and coming getting like little feel the they with that. and really make were of are bluntly, I a we part than us that productive this yes, get in people behind just having us, not But, it a we're think fee talking X% "Oh, more saying, more

makes of think thing right uptake business. Are the customers, terms even you've any that those the testing of perfect mentioned means the for No, I of you now? the And guess maybe how data or conversations that more sense. inputs course no, providing going? with in conversations I a over that sharing quarter,is past customers then guess, are of idea one with as any I those Grow early seeing with

[ launching CoreStats product summer. ] a over have this We actually called

some frankly, we that -- get start actually those kind of kind solidified want been And of of to we so conversations. we've having before

those make haven't want we of personally I had to a because didn't lot So it too conversations, theoretical.

of you color those? So Do I don't you Luis, any any know, there? had have have

you're what No, Jim. saying, I agree with

broad how our a talking belief, going is, are when doing make the profitable more portfolio, in start profitable, obviously, [indiscernible]. we identifying part you that you just better conversations of so of do of that. about across be kind job No, our users But again, to

that, a And think kind think it is do of Data how it And I helping of it's how further of makes as giving improve monetization. spend data less as whether or as we improve I together Unity work like so much somehow of kind to to, ad way, of think it data benefit. people. that kind but use as more part of that we're sense when you I to them articulate to it

Thank question, you, Martin from Oppenheimer. Matt. Yang next The

My implementation. the any first advertising think you in past, you plan. question the fee of you similar still later? is designs In use regarding part the to to runtime of Do to have the fee fee launch fee a by segment offset runtime intend Do runtime was expenses some time still and its that Grow I using help way? the

that I'll still to think of And the don't I the subsidization so you don't our kind -- as source. we our we based cetera, customers. call direct I I the and more think it, monetization think We're much. that's right? But way. runtime as that part us indirect, revenue look us key to therefore, Yes, for be and stack, make of that need and choose as revenue And some whether need sustainable that." sustainable, ensure way we I degree I don't on much it or requires To a care as the the to care, continue "use it's indirect, is able invest all as we revenue and "pay don't look or make monetization, stream. for really ad long-lived, at source runtime. our cetera, on help we usage," -- again, direct want build to a of it's get et plan. be to whether to runtime it much I as that et a is, at extraordinary the

yes, I runtime don't in guess guess LevelPlay, if yes, a a a fee. you're So have I sense -- that using you

Makes sense.

something maybe that? to product information Can Grow? on on a is give Create sits CoreStats. Is in more you different? going Or us that question Next that or be entirely

in our Create better games. product is is it than I service help more customers would a -- call it are offer engaging their we of to a Well, users it because how with understand that

ad to -- data the engagement. also -- way data it's from all be course, of so that valuable crash side through of And as well. kind could measures And the anywhere around various is on

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value And customers this holistically? I value we right? thinking no example great customer, about about and for more thinking about where but is Grow, these thinking And by game we're how longer more a we're and us the think Create do create more to them

Great.

Gili next Naftalovich is Goldman question our from Sachs. So

guys you for for and is seeing we are made. comment is something may. I Jim trends should have this I Luis, And follow-up new really your the Perfect. just the off if a of Luis, on expect that one and second that you with the different any And X both customers of around half back Create that the Engine? roll-off in this Grow? Unity Or Monetization Are and more using of

where create that, say assets not going lot can in But together actually really how do the synergies we think a of yet. we second the that that's half, something that to between Unity we would do. I have we and X. that can the unique only Yes. on seeing come it's We're

to expect the thereafter. increase should we that to So to years come then in half back and the continue

I did just mean acting part right? it's just of in And it, it's way time, this Unity this Yes. started literally reorg not X, and around just we January.

We getting feedback. of to [indiscernible] behavior priced versions Unity. very to will plan people. marketing starting hear migration kind from a Again, the higher of actually engagement engage. feel we're to to about I up take time. slack of So of But bit good positive our ahead on

in investment came in pertains the of on guess you the the one How I do mean, have in of evaluate strong initiatives as you line you it line of with pipeline? business like Luis, and very thought, comfortable again, I each too, that allocation to capital items opportunities, that this quarter. EBITDA, business

Yes. I in where mean in because everything with line going make we're we're resonate we're it's being things seeing. thoughtful this that very investing and to we on particularly is -- invest,

we we're of one data where our in We're our to investing I and investing? kind one help -- consumption that that investing of expecting Grow because of to significantly in drive cloud improving side. you on ask So That's are in the EBITDA was not why QX, us will guys data. is is reasons the

of we the then So investing we of things: bottom data benefit because it cloud particularly the and continue to very the benefit to flows cost area savings, we're the pays need to more the improve consumption but restructuring drive that line, just on and portfolio. out on on X data; And that's through the where scientists, see an quickly.

of So you buying kind that's shares. we've as capital where been we're know, going. On allocation,

market a based saw. is our We the going. million $XX reduced we continue we'll And gain, on whatever to good what you also the discount, way. significantly, a by We debt do had at as evaluate

So Gili. we're constantly that, looking at

is Needham. from question Thank from Bernie Gili. last you, And McTernan

about -- any and some of unpack Grow, throughout the much. the thinking on And just you year? any how or Just you on so to has sentiment the business why made macro comments just runtime on about it progress impact thoughts the also fee? you customer can expect impact Jim, then on improved

things. couple a so of Well,

down this with think get light you're the means of think kind our dire spent, as when I and and they really I it dollars of talking kind existing and day, what not it's where monetized game customers depending about thought those as app contracts of kind it in you cold ad of a, or whether varies it on an the realized, have as and get was how purchase people whatever. around sit or it's

effort to down a create engineering moving talk does building that runtime, I not about, Unite, work it. us think view continuing the a because about lot that then okay, of immediately depends, to with of with runtime revenue. through that value of right? I be have lot X.X% value them. can a I the you from down. realistic and as the the what And most and worst fee this we through people calm opportunity, So all of runtime, And of my Engine, now saw A, of into kind kind saying, case kind we sit performant and actually forward. And would start the -- and goes drive that. we into performant are here's forget it's the back an it I'm on it -- work as keeping say, then what and of through you drive a People and far even runtime to get can but people like go let There's as about It that. work

rational it's market. conversations. I have but about, to time could knee-jerk my more a wish of start god, reaction more You say some just "Oh in from I I the think it's it than great that, is not

we what the you." And here's kind softened, that. of work cost "Well, conversations value worst kind me to to it's the to of more than of actually and they charge a for more here's doing, going we're really it's how looks it you're case I getting, sobriety don't and thinking know more" to here's lot and here's the to seeing what if a become relationship, like from actually of want I much and kind little after You think, productive It's it's of a be. the math a bit what while together. likely combination just, moving

Thanks Great. a lot.

today, So for meeting a forward investor in quarter looking up with various at during to to great day. we're we're conferences. the dialing Have you you the call. going wrap and that, Thank

you. Thank

Thank you.