Unity Software’s Earnings Call Highlights Strong Performance

Unity Software, Inc. ((U)) has held its Q1 earnings call. Read on for the main highlights of the call.

Unity Software, Inc. recently held its earnings call, revealing a generally positive sentiment with strong performance in several areas. The company exceeded its financial guidance, made successful technological advancements, and expanded into new verticals. Despite challenges such as declines in specific revenue segments and high debt levels, the overall sentiment remains optimistic, driven by strategic innovations and financial health.

Exceeded Revenue and EBITDA Guidance

Unity Software surpassed its revenue and adjusted EBITDA guidance for the first quarter, with revenue exceeding expectations by $20 million and adjusted EBITDA by $19 million. This achievement underscores the company’s robust financial performance and effective management strategies.

Successful Migration to Unity Vector

The company completed the migration of its ad network to the AI platform Unity Vector ahead of schedule. This transition has resulted in a 15% to 20% increase in installs and in-app purchase value on iOS, showcasing Unity’s technological prowess and commitment to innovation.

Unity 6 Adoption

Unity 6 has seen significant adoption, with 4.4 million downloads and 43% of active users already migrated to the new version. This widespread adoption highlights the platform’s appeal and the company’s ability to meet user needs effectively.

Growth Outside Gaming

Unity’s platform is experiencing growth beyond the gaming sector, attracting new customers like Phillips, Siemens, and Toshiba Elevator across various industry verticals. This diversification strategy is expanding Unity’s market reach and potential revenue streams.

Increased Cash Flow and Strong Balance Sheet

Unity reported an improvement in free cash flow by $22 million year-over-year and maintains a strong balance sheet with $1.5 billion in cash. This financial stability positions the company well for future investments and growth opportunities.

Decline in Grow and Create Revenue

Despite overall positive performance, Unity experienced a decline in Grow revenue by 4% and Create revenue by 8% year-over-year. This decrease is attributed to a transition from low-margin professional services, indicating a strategic shift towards more profitable segments.

Non-Strategic Revenue Decline

A decline in non-strategic revenue is anticipated to impact the second quarter results, following a $17 million contribution in Q1. This highlights the company’s focus on optimizing its revenue streams.

Debt Levels

Unity’s debt stands at $2.2 billion, although it is mitigated by a recent $690 million convertible offering to extend maturities. This financial maneuvering reflects Unity’s proactive approach to managing its liabilities.

Forward-Looking Guidance

For the second quarter of 2025, Unity forecasts total revenues between $415 million and $425 million, with adjusted EBITDA ranging from $70 million to $75 million. The company emphasizes the significant progress of its AI platform, Unity Vector, and the transformation towards a high-margin subscription business, which now constitutes nearly 80% of Create revenue.

In conclusion, Unity Software’s earnings call reflects a positive outlook, driven by exceeding financial guidance, successful technological advancements, and strategic expansions. Despite challenges like revenue declines in certain segments and high debt levels, Unity’s strategic innovations and financial health position it well for future growth.