Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Unity Software Inc (U, Financial) exceeded guidance for both revenue and adjusted EBITDA in the second quarter.
- The company reported a 35% improvement in GAAP net loss compared to the same quarter last year.
- Unity 6, the latest update to their game engine, is on track for release and has already seen significant traction with developers.
- The Industries segment grew 59% year over year, becoming a larger share of Create Solutions revenue.
- Unity Software Inc (U) is adding world-class talent to accelerate transformation, including hiring Jim Payne as Chief Product Officer for advertising.
Negative Points
- Revenue from the strategic portfolio was down 6% year over year.
- The company adjusted its full-year revenue guidance down, citing a more cautious view of expected recovery in the Grow business.
- Adjusted EBITDA guidance for the year was also reduced, reflecting challenges in achieving previous targets.
- The Grow Solutions revenue declined 9% year over year, with pressures in the monetization business.
- Unity Software Inc (U) acknowledged that it will take longer to see the full impact of improvements in their ad business on revenue growth.
Q & A Highlights
Q: Can you provide a framework for growth in the ad business, particularly regarding the rebuilding of the ML and data stack? Is this a short-term or long-term process?
A: Matthew Bromberg, CEO: We've been increasing the pace of product releases in our ad business, with improvements in ad units, mediation platform integration, and models. While incremental improvements are ongoing, we need fundamental work on our machine learning and data infrastructure to achieve long-term success. We have the necessary pieces and data, and we're executing this transformation quickly.
Q: Regarding guidance, should we expect double-digit growth in the Create business this year and beyond?
A: Luis Visoso, CFO: We expect strong double-digit growth in our Create subscription business. However, professional services and strategic partnerships will remain variable. It's premature to provide guidance for 2025, but we will update expectations soon.
Q: How should we think about the impact of Unity 6, runtime fees, and subscription tier changes on Create's growth?
A: Matthew Bromberg, CEO: Customers understand Unity's value and are willing to pay fairly. Price increases take time to flow through the system, related to upgrade cycles like Unity 6. We expect these changes to contribute to growth over time.
Q: Does the Rule of 40 expectation still apply, or is it being reevaluated?
A: Matthew Bromberg, CEO: The Rule of 40 remains a goal, focusing on attractive revenue growth and profitability. While it's too soon to forecast when we'll achieve it, it's an important focus for us.
Q: What is Unity's positioning in the industry, and how does it influence your initiatives?
A: Matthew Bromberg, CEO: Unity is essential to the ecosystem, touching billions of players. We're focused on creating a culture of execution and accountability, adding world-class talent, and deepening customer relationships. These efforts will strengthen our position and drive growth.
Q: Can you elaborate on the guidance reset and any changes in trends?
A: Luis Visoso, CFO: We're being more cautious, especially in the Grow Solutions segment. We're guiding stable revenue from Q3 to Q4, with minimal seasonality expected. This cautious approach is part of restoring credibility and ensuring long-term positioning.
Q: What are the opportunities and changes in the Industries segment?
A: Matthew Bromberg, CEO: We're excited about growth in industries like auto, retail, and manufacturing. Demand is strong, and we're adding new customers. We're at the beginning of expanding our go-to-market strategy through partnerships and direct sales, providing significant runway for growth.
Q: How do you plan to execute and achieve greatness at Unity?
A: Matthew Bromberg, CEO: We're creating a culture of execution and accountability, adding leadership, listening to customers, and accelerating product innovation. We have the vision, technology, and support from partners and customers to succeed. Execution is key, and we're confident in our ability to deliver.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
