Unity Software (U) 8 Aug 242024 Q2 Earnings call transcript

Welcome to Unity's Second 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 Matt Bromberg, our CEO; and Luis Visoso, our CFO. future I including note outlook, are statements market expectations begin, contains today's industry subject we similar opportunities, statements, and and forward-looking about for to before risks, wanted of assumptions. that to discussion trends, items, uncertainties But all performance which financial goals, business section information at filings sec.gov. And more risks uncertainties our about you can in of and these find the Risk Factors

no obligation statements. Actual to or results we may forward-looking differ, update take and any revise

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

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As more thank updating employees customers, to always, I'd our I our progress in support. on you our partners look time and forward their for our like to ongoing the ahead.

Luis, over you. to

together believe be Thank saying would a a want it we to that you, with Matt. full start we will accomplished I confidence over privilege margins X last supporting my customers, thank and shareholders into I CFO by lead all stronger particularly and that I the have for years. that has organization fixed me. lot performance to for employees. expanded been X been portfolio. as Unity has Matt. to Unity Unity have he months employees, in great those It spend and I for the

Mark said, baton he everything to Mark. on his we full to With Unity I'm worked happy many I we lead. I ability need our results. very turn knows together profitable to growth. pass me to that, well. As to he in for years, the confidence have have healthy, achieve sustainable and have on and and let

was and million to profitability. revenue exceeded Revenue quarter guidance from strategic $XXX X% $XXX that $XXX favorably portfolio the million. million, EBITDA guidance compares adjusted and both second This continued on down year-over-year. our of We're to results progress for our pleased

Our improvement the in XX% of loss GAAP from $XXX second a $XXX million of net net loss for a XXXX. the quarter quarter million, was

$XX and the total for of This delivering company favorably quarter year, improvement guidance EBITDA the credits compares to customer the $XX as million, margins. operating continue $XXX the same expand drive year. in from last savings Adjusted was the million $XX also million we and XX% for to a quarter million excluding gross prior to

expanded expansion the year. and is This quarter, the better driven non-GAAP gross margin while our our models. to ML consumption gross to XX% in as to by we cost XX% quarter same mix The increasing margin train of cloud prior compared control

making strategically, We spending to drive continue to spending, to efficiencies. and increase where to stable keep manage choices to where operating continue where expenses

efforts customer and in EBITDA prior come of point As year. XX% to same by basis of a marketing. revenue of reach and result, us from in followed non-GAAP the of sales for largest reductions XX% enabled credits are an G&A, year-over-year year. XXX revenue from the down year-over-year XX% onetime prior to expenses down These the excluding the Proportionately, quarter the quarter, operating XX% margins adjusted increase,

to million We closed quarter prior This down second year. in the flow billion. diluted the million in shares and $X.X fully equivalents We shares, in Cash million free delivered million cash from second $XX diluted the $XXX the prior the fully in $XX from slightly end in guidance the favorably our quarter, compares quarter. at with XXX% quarter. quarter cash were XXX.X up the of

X% strategic up and Industries XXXX. XX% second year-over-year customer our Create to XX% end be subscription the $XXX on Create year-over-year. XX% the from strategic the I in revenue. XX% businesses. business. quarter quarter, totals represents by will we down revenue benefit driven second in quarter is our as now our strategic quarter-over-quarter from portfolio increase Create subscriptions. from continue was increase million, Solutions higher-priced price provide from is perspective revenue Growth X% to in revenue upgrade in continues these the to fastest-growing of XX% professional at a very of Solutions revenue, grew partnerships quarter additional a 'XX reductions in nonsubscription services up of strong first and and of second In following our the industries and now Solutions

X% down in which very portfolio and in of quarter a decline by second is X% revenue pressures to year-over-year pleased strategic and the improvements partially driven quarter-over-quarter. our our by from revenue performance sequential mainly from with the basis, up product due business, Aura. after Solutions sequential $XXX monetization million, declines, the year-over-year offset was strong We're On was X quarters growth Grow seasonality.

to With that, me let turn guidance.

positive products, longer the it see down, revenue we're in to and will improvements take now growth. our full adjusting to our the the we full impacts while we us Ad from Network impact guidance LevelPlay are seeing made being believe year, For that

of to for portfolio guidance million This recovery $X,XXX to our represents view $X,XXX and X% year-over-year compared $X,XXX strategic a million to more is business. cautious previously. decrease updated million million of to Grow Our a revenue our in expected X% the $X,XXX

continued double-digit subscription We growth our Create business. expect in

believe the be EBITDA that reduction, the to in for million which efficiencies We are million we're million to the cost further million driving over revenue there execution. greater To included savings $XXX more is the reduce a guidance to disciplined $XXX the $X million in On time gained adjusted million to in of impact compared through year range, guidance. $XXX $XX is previous the guidance. to $XXX

quarter, third guiding to to $XXX the $XXX For we're revenue, year-over-year. strategic X% million in X% to down revenue million

with year-over-year to longer take and materialize. expect our to continue said for just double business I grow turnaround that what to year, will subscription Grow Create Consistent the digits we the

our Grow for $XX Our in the million, to $XX includes increases. the merit needed addition EBITDA strengthen to million business, annual is the adjusted guidance third to of which investments impact quarter

Last, and we at million of fully estimate year-end reduction the from diluted third of a fully fourth expect quarters. prior XXX XXX shares. million is shares diluted the end our This

a annual Daniel? driven by the net increase quarter-over-quarter count As dilution result, call be is in that our so turn quarter the entirely that, grants. will around fully we third let share Daniel diluted X%. can me year-over-year take The in questions. our With to equity your

first at from the question BTIG. So Instructions] [Operator Lampen Clark comes

you okay? Can hear guys me

Very well, Clark.

I on want business. to Matt, Great. ad the start

letter long and think mentioned from terms data and map as sort of about process of releases we shareholder road the the in of that sort You the ML the Is longer you rebuilding it quarter's of priorities? here in started turnaround, stack sort in a general you growth? right of of sort us and now could center for what Is front potentially a give of terms framework process, process? a this

around improvements models. we've pace our units. upping question, ad integration into do And eased we the platform. are feel with We're to need customers. mentioned, as reactions those time, really and fundamental And, Luis going machine do the seeing arrived. our and Yes, as like encouraged that been updates, support on of to I more some mentioned our infrastructure stack. that for letter same our positive continue data our releases the made We've learning we we from in multiple We countless work, ad Thanks introduced pace. began mediation product we're before by business. for I We've the Clark. At to

you while to day, improvements the capabilities day, you you you've have term. long are and every in when fundamental win market this got that differential, of end the incremental that's how at the make can over compete Because

And the so about that. really for we're opportunity excited

the we'll activity, we this. data think impact everything have do We that. have We're the and pieces we about going we we have and from see just relatively And execute to that we're through to quickly. excited need the that

can I up If quickly follow helpful, That's on Understood. Luis. the guidance.

also? this sort old to I way we to that still of growth I clarify, think, should bridging guidance double Is the current just of digits, you of guess, create a expect think said thinking right from sort of the year. this I beyond maybe, business growth, that sort stage? sort medium-term is guess, there that framework about about, 'XX at of think growth of Or for for general, we I could

Yes, we is growth answer. X Create. said within One parts to business from I our that what your double-digit strong expect is subscription

as As X are within a overall. is partnerships and you components there always Create has is business. strategic and it been. will There partnerships. services There services know, professional be lumpy Professional subscription strategic

remember, will on fluctuate QX continue it to strong agreement. QX, had we and Now and very a strong less based our

strong expect growth the So continue subscription on you should side. to

us. Matt for time. I I I a give your a 'XX need bit little think mean, premature it's we more to think bit on question, little

things, we'll to evaluate come back for to and next continue soon. you us and year expectations Let share

question Cost Matt from Morgan will next come Stanley. from The

you me? Can hear

Yes.

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Yes.

and the make the pick you then an me question. can up of Let -- half observation second I'll initial Luis,

keeping road role to we willingness, And East we of I And order business and customers. to our healthy real some I and Middle learn also understanding in had speak really on when to of Europe. fairly meet that company York play around with groups joined New especially customers I that some at ecosystem value and for customers with customers real around the the was was in get Unity a the in out pleased met of important and and and there's a first growing and The of what the I real just is the largest individual the small excitement larger our a pay deliver.

more Luis lot a -- that's testament has Unity everybody coming the really there's been it's So great news, work to at does keep company the day every been and to is things tend here pricing. There to strong. it increases and in take that of these I'll system. And observe one on the time to price just flow will you the take into through a

to example, not they're something other both they're cycle, X Unity upgrade So that see for of related you and the things.

So don't already see see you we time in have. do but over seen with as to we -- see right growth you've as coming expect we away, them the to -- begin subscription them

helpful about benefit customers what is what not I add to we Matt, very think increase ago, already lot price Yes. a seeing higher-priced took SKUs. know. continue to Matt to we mentioned, to And X we're you the from as years moving

and great is, than Now, we've before, -- been talked higher our revenue skew, as business the to price talked as a drive more and been our one the has fastest-growing drive helping in that that's -- business. bring we've success of has before, us industry significantly

ago, something Great. of out expectation still guess, does out, that does of is And reevaluating laid XX a outlook the you apply? on quarters right I now? then just of Or that the sort couple further Rule that that quickly, you're

little is attractive delivering For It's us, and on. meaningful building business kind goal focused profitability goal, focused a long-term and revenue line. forecast be growth We're on XX a focused It's top of a on for we're to is soon to focused right too the when on, Rule there. of we're bit able important. that us sustainable what that's something the on the with and to right? bottom get exactly going definitely the we're it's But both growth, it's and

So is from question the Sandler at Barclays. next Ross

X questions, Matt. just Guys,

back the in made be other AppLovin and to you your that product would the product help of Unity tinker grow get competitive? and you with said of need a beyond to Any later as that engines Or X are tweaks what these or get Jim market then ad view just alterations remarks, gaming kind competitive. the you knows to competitive? about happening side, similarly kind are are so more ad fresh models to X on of this lot rollout there? Create that's that the your Do any think that stable the the used And assets having that earlier you to there So on there prepared kind go-to obviously supercharge missing from out year. would business portfolio

it's question. the for my Thanks pleasure. Yes,

Create share. we're it's that Engine, a company it's dominant But to cycle. we're because first. integrated. to and market we're What world both want them. take because we the important pieces position only in understand unique want entire and game side, supporting most with in the is to capable particularly -- we is just only performing monetizing acquiring mobile our and Let's the best, really the players the engines, just -- see those the really development ad such And not have customers of They with see marketing because Create, believe on a not

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on, we're really about. So something focused really excited it's I'm

side On both. business, the do you need of to our ad

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The Gili Sachs. comes next from Goldman question from

First appreciate the of of off, Matt. broader your positioning place. is initiatives what congratulations you to to the I given taking? the improvements Can landscape. that into Unity's how putting operational are And in assessment prioritization your short-term us And are you, I'm color hear experience, influencing you you letter. is give in of curious the industry industry the examples

saying, how piece just Unity about I think we central well broadly was that is as that's maybe ecosystem the understood -- is. Yes, least I how ecosystem and the the are to large

app things app letter. talked Some of the economy most of the The I game the economy, the of is economy. in XX% about

players -- developer when they engine that Unity need and We choose you a through decide billions developers of that can are touching a of game products. to ad game. our There build from are hundreds our thousands of

to are and grow. important really really, are us provide questions a foundation ecosystem for these real going So to

accountability. we've great that talent the accelerate We're execution us, and about to it's of into we're execution got most of important execution Jim us. example of And innovation add execution going the culture to and a mostly is that. then On culture lean seeing. product world-class out for to to adding rapidly a and creating for that That's side,

in recreating if want deepening freight we be our gotten and nice a can we freight all across better can we bonds better are very, listen which customers, business. that And little past, to in do been and do a we has very some If better those our things, customers with position. that partners and alongside the of --

can, Is for more there mostly I And was think if one change the Luis. Can just accounting models off based of solutions the deployed? it you most talk trends just the any you the was that the Grow caution. through guidance -- to new led added change you, of in you're the Appreciate reset? quarter, be driven was make there this for I that. on something If to in the that way Or linearity was change? and guys timing to your like

We're to QX, guiding the have already you full Yes. for cautious, a guide when mean QX and kind quarters, more said. millions. as and mostly year see I X stable right, And just being you we're of and can you QX you plus/minus few QX,

stable. pretty So it's

on counting lot with it of side. if we're be would driver, quarter. just But more the That's last not Grow the Gili. comes, that's great. being seasonality that the So a And cautious in really

approach right I add is focused our prudent but is a to taking credibility on the restoring confident prudent important ecosystem positioned really being and real well and differentiated the we've long everybody approach. that mostly just then in in we're us, a our want forecasting offering, ecosystem within because so we're term, got that now for to with and we're

at Becker Blair. next William from Dylan comes The question

time. Just here. one on and the of next speak sake to great endeavor, Matt, congrats for here the with Luis you,

more traction to incremental with of leveraging of would Any of broader maybe kind of of lot but color out additional Create. off obviously, be kind that establishing the call share wondering XX% you here, talked a guys opportunity Jim seeing You there, if of pretty about I impressive did the industry's and there SIs. sold know larger piece a partners, great. kind you're Jim becoming scalability, ecosystem, cap growth had

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The next question we hear is Parker Parker, Lane from you. Stifel. can't

hear Can me now.

Yes, we can hear you.

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So lot that's so what of confidence. a runway here. us gives much There's

Josh last And come from Tilton will Wolfe. question from

Can you me? guys hear

Yes. Very, well Josh.

me. for questions Two

today all, that I asked questions is we the on lot a guess a the Matt, I if exactly lineup, I'm not feeling starting what is of letter the of kind left going have congratulations. playbook First take sure shareholder And what forward. tell from like I'm summarize just some and I Unity just strategy? to that were investors what to in call us a then of this but trying understand to new greatness I you playbook give actually you on guess to can question. you the a is like that if that were back broadly again, like follow-up execute few just what us can guys sentences, to And confidence to is, getting

Yes. Thanks question. for the

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feels just the to you a like lot non-gaming a business. potential maybe talk there I this of to quick coming be business. around for may Create gaming Then used but used guys like up, background. the you're to me. making obviously helpful. larger be Create Super from follow-up feel I for it excitement to be than the It gaming

of side improving relationship on focused very seem business customers ad and the gaming the the with You those kind fixing as well. of

forward do and business how of about new of sit non-gaming as investments role? that the we Create come in you in kind this think So trajectory

Yes, great questions.

I capabilities the customer that our think, industry natural develop core as a extension we in segment of we see gaming. business the in

So do I development industry well. investments All them product at as benefit and to don't see us technology tends the the we odds. as

no have be back going I from a of need the this comms is and do I the clear that over to there's grow, about So on super our lot to our think goes we also prioritization. that question about, full perspective. years, we execution. this have lot enthusiasm but talked to

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on So execute motion our we strengthen we at do core, our can which the can can and same both go-to-market time. there, if we better

you. Thank

I wrap we some before provide So words. final up, wanted to for Matt

want Yes. you thank I all us spending for just with today. the to time

believe again we we telling as you, your forward with we we vision we you have really I've about to this As we of more shared we the all soon. look appreciate pieces go, and and clarity you to forward seeing the and need look that and support,

you. Thank

Thank you.

Thank you, everybody.