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Unity Software (U)
NYSE:U
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Unity Software
(NYSE:U)58Neutral
Positive Factors
Ad Model Launch
The earlier launch of the new ad model signals positive performance and an earlier path to industry-level growth.
Financial Performance
Revenue and adjusted EBITDA were reported above consensus expectations, showcasing strong financial performance.
Negative Factors
Guidance Uncertainty
Unity provided a softer-than-expected guidance for Q1, leading to uncertainty regarding performance and prudence dynamics.
Unity Software (U) vs. S&P 500 (SPY)
Market Cap
$9.49B
Dividend YieldN/A
Average Volume (3M)13.80M
Price to Earnings (P/E)―
Beta (1Y)2.42
Revenue Growth-17.10%
EPS Growth21.82%
CountryUS
Employees6,748
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)-1.69
Shares Outstanding409,664,520
10 Day Avg. Volume16,146,055
30 Day Avg. Volume13,798,085
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)5.23
Price to Cash Flow (P/CF)21.10
P/FCF Ratio21.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$30.77Price Target Upside27.20% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering15
Unity Software Business Overview & Revenue Model
Company DescriptionUnity Software Inc. is a leading platform for creating and operating interactive, real-time 3D (RT3D) content. With a focus on gaming, Unity offers a comprehensive suite of software solutions that enable developers to create, launch, and monetize immersive experiences across a wide range of devices and operating systems. The company's flagship product, the Unity engine, is widely used in the gaming industry, while also being leveraged in sectors such as architecture, automotive, and film for visualization and simulation purposes.
How the Company Makes MoneyUnity Software primarily generates revenue through a combination of subscription fees for its software offerings and usage-based fees from its cloud services. The company offers various subscription plans for its Unity Pro, Unity Enterprise, and Unity Industrial Collection, which provide access to advanced features and tools for developers. Additionally, Unity's Operate Solutions segment contributes significantly to its revenue by providing services such as Unity Ads, Unity In-App Purchases, and Unity Analytics, which help developers monetize and optimize their applications. Unity also engages in strategic partnerships and collaborations that enhance its product offerings and expand its reach into new markets, further driving revenue growth.
Unity Software Financial Statement Overview
Summary
Unity Software faces challenges in revenue growth and profitability, indicated by declining revenue and persistent losses. However, the balance sheet remains stable with manageable debt levels, and cash flow improvements suggest better liquidity management. The company needs to address operational inefficiencies to enhance profitability.Income Statement
Unity Software shows a declining trend in revenue growth, with -17.09% from 2023 to TTM, indicating challenges in maintaining its growth trajectory. The company's gross profit margin in TTM is approximately 73.49%, which is strong, but the net profit margin is negative at -36.59%, reflecting significant losses. Persistent negative EBIT and EBITDA margins highlight ongoing operational inefficiencies.40
Negative
Balance Sheet
Unity's balance sheet indicates moderate financial health with a debt-to-equity ratio of 0.70, suggesting manageable leverage. The equity ratio at 47.36% points to a balanced capital structure. However, negative return on equity of -20.80% in TTM indicates poor profitability for shareholders.55
Neutral
Cash Flow
The company has shown improvement in cash flow management with a significant increase in free cash flow by 60.03% from 2023 to TTM. The operating cash flow to net income ratio is 0.48, which is reasonable given the negative net income, and a positive free cash flow to net income ratio of 0.43 shows effective cash management despite losses.65
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.81B | 2.19B | 1.39B | 1.11B | 772.45M | Gross Profit |
| 1.33B | 1.45B | 948.52M | 856.90M | 600.10M | EBIT |
| -755.15M | -762.42M | -882.21M | -531.66M | -274.81M | EBITDA |
| -755.15M | -209.35M | -663.45M | -465.53M | -231.84M | Net Income Common Stockholders |
| -664.29M | -822.01M | -919.49M | -532.61M | -282.31M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.52B | 1.59B | 1.59B | 1.74B | 1.75B | Total Assets |
| 6.74B | 7.24B | 7.83B | 4.84B | 2.67B | Total Debt |
| 2.24B | 2.71B | 2.71B | 1.82B | 123.91M | Net Debt |
| 721.25M | 1.12B | 1.22B | 763.53M | -1.15B | Total Liabilities |
| 3.31B | 3.83B | 4.08B | 2.45B | 634.08M | Stockholders Equity |
| 3.19B | 3.18B | 3.53B | 2.39B | 2.04B |
| Cash Flow | Free Cash Flow | |||
| 286.00M | 178.78M | -116.57M | -153.39M | -20.99M | Operating Cash Flow |
| 315.55M | 234.70M | -59.43M | -111.45M | 19.91M | Investing Cash Flow |
| -42.41M | 44.04M | 723.23M | -1.84B | -575.19M | Financing Cash Flow |
| -338.31M | -174.01M | -226.63M | 1.72B | 1.70B |
Unity Software Technical Analysis
Positive
24.19
Price Trends
23.01
Positive
22.67
Positive
20.20
Positive
Market Momentum
0.60
Positive
51.18
Neutral
25.87
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For U, the sentiment is Positive. The current price of 24.19 is above the 20-day moving average (MA) of 23.73, above the 50-day MA of 23.01, and above the 200-day MA of 20.20, indicating a bullish trend. The MACD of 0.60 indicates Positive momentum. The RSI at 51.18 is Neutral, neither overbought nor oversold. The STOCH value of 25.87 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for U.
Unity Software Risk Analysis
Unity Software disclosed 66 risk factors in its most recent earnings report. Unity Software reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Unity Software Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $55.98B | 50.69 | 49.69% | ― | 12.46% | 22.28% | |
66 Neutral | $35.65B | 34.81 | 14.04% | 0.56% | -2.99% | -0.46% | |
62 Neutral | $36.69B | ― | -51.45% | ― | 1.00% | -148.89% | |
60 Neutral | $1.16B | ― | -15.60% | ― | -9.83% | -3191.56% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% | |
58 Neutral | $9.49B | ― | -20.84% | ― | -17.10% | 21.82% | |
57 Neutral | $39.08B | ― | -628.33% | ― | 28.68% | 22.57% |
* Technology Sector Average
Performance Comparison
U
Unity Software
24.19
-2.91
-10.74%
ADSK
Autodesk
259.75
1.49
0.58%
EA
Electronic Arts
140.04
4.04
2.97%
TTWO
Take-Two
204.33
58.46
40.08%
CRSR
Corsair Gaming
11.22
-1.43
-11.30%
RBLX
Roblox
57.17
15.13
35.99%
Unity Software Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: 12.67% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Positive
Unity's fourth-quarter performance was strong, with revenue and EBITDA exceeding expectations and significant growth in the Create and industry segments. However, challenges remain in the Grow solutions segment, and there is caution around the transition to the new ad model in Q1.Highlights
Revenue and EBITDA Exceed Guidance
Unity's Q4 revenue from its strategic portfolio was $442 million, up 4% year-over-year, and adjusted EBITDA exceeded guidance by 26%.
Create Solutions Growth
Create solutions revenue from the strategic portfolio was $139 million, up 9% year-over-year, driven by a 15% growth in subscriptions and a 50% growth in industry revenue.
Unity 6 Adoption
38% of active users have upgraded to Unity 6, and it has been downloaded 2.8 million times since launch.
Success in Industry Segment
Industry revenue grew by 50% year-over-year, with notable new customers like Toyota and Raytheon.
Strong Free Cash Flow
Q4 free cash flow was $106 million, up 74% year-over-year, and full-year free cash flow was $286 million, up 60% from the prior year.
Lowlights
Challenges in Grow Solutions
Grow solutions revenue was $303 million, up only 2% year-over-year, reflecting challenges in the ad business.
Non-Strategic Portfolio Decline
Revenue from the non-strategic portfolio was $15 million, down 92% year-over-year due to a portfolio reset.
Prudence in Q1 Guidance
Q1 revenue guidance reflects expected disruption from transitioning to the new Unity Vector ad model.
Company Guidance
In the Unity Software fourth quarter 2024 earnings call, the company reported significant achievements in various metrics, exceeding guidance for both revenues and adjusted EBITDA. Unity's strategic portfolio revenue reached $442 million, a 4% year-over-year increase, with Create solutions revenue at $139 million, up 9%, and Grow solutions revenue at $303 million, up 2%. The company announced the launch of Unity Vector, a new AI platform for its ad network, with migration expected to begin by the end of Q1 2025 and complete by Q2 2025. In addition, Unity saw a 15% year-over-year increase in subscription revenues, with Unity 6 being downloaded 2.8 million times since launch. The industry segment experienced a 50% revenue growth, maintaining its position as the fastest-growing subscription business. Unity's adjusted EBITDA for the quarter was $106 million, representing a 23% margin, while free cash flow reached $106 million, up 74% from the previous year. The company holds $1.5 billion in cash and reduced debt by $415 million. Unity provided guidance for Q1 2025, expecting revenues between $405 million and $415 million and adjusted EBITDA between $60 million and $65 million, reflecting cautious optimism due to the ongoing transition to Unity Vector.Unity Software Corporate Events
Executive/Board ChangesBusiness Operations and StrategyFinancial Disclosures
Unity Software Appoints New CFO Amid Strategic Changes
Positive
Nov 7, 2024
Unity Technologies is undergoing significant changes, including the appointment of Jarrod Yahes as the new Chief Financial Officer starting January 2025. The company is focusing on improving its financial performance with a shift back to a subscription-based model, cancellation of the Runtime Fee, and the launch of Unity 6, its most stable version yet. Unity’s efforts are aimed at enhancing game development capabilities and expanding cross-platform applications beyond gaming, with notable collaborations with companies like KLM and Deutsche Bahn for VR and AR solutions.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.