• Total Revenue: $429 million, down 2% year over year, up 1% sequentially from Q2.

• Create Solutions Revenue: $132 million, up 5% year over year, up 2% quarter over quarter.

• Subscription Revenue Growth: Up 12% year over year.

• Gross Revenue from Strategic Portfolio: $298 million, down 5% year over year, up 1% quarter over quarter.

• Adjusted EBITDA: $92 million, compared to guidance of $75 to $80 million.

• Free Cash Flow: $115 million, up 11% from $104 million in the prior year.

• Cash and Cash Equivalents: $1.4 billion at the end of the quarter.

• Full Year Revenue Guidance: Raised to $1,703 million to $1,780 million.

• Full Year Adjusted EBITDA Guidance: Raised to $363 to $368 million.

• Q4 Revenue Guidance: $422 to $427 million.

• Q4 Adjusted EBITDA Guidance: $79 to $84 million.

• Warning! GuruFocus has detected 6 Warning Signs with U.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Unity Software Inc (NYSE:U) exceeded its revenue guidance for the third quarter, reporting $429 million compared to the expected $415 to $420 million.

• The company successfully launched Unity 6, which is described as the best performing and most stable version to date, indicating strong product development.

• Unity Software Inc (NYSE:U) has seen strong growth in its non-gaming sectors, with new key customer accounts such as KLM and Deutsche Bahn, showcasing diversification.

• The company has made significant progress in rebuilding its machine learning and data infrastructure, with early positive results in testing.

• Unity Software Inc (NYSE:U) has strengthened its leadership team with experienced hires, including a new CTO and an upcoming CFO, which is expected to drive future growth.

Negative Points

• Revenue from Unity Software Inc (NYSE:U)'s strategic portfolio was down 2% year over year, indicating challenges in maintaining growth.

• The company faces continued caution regarding the timing of revenue recovery in its grow business, reflecting uncertainty in market conditions.

• There are additional compute costs expected due to the training of new machine learning models, which could impact profitability.

• Unity Software Inc (NYSE:U) has faced challenges with customer relationships due to previous pricing strategies, necessitating a repeal of the runtime fee.

• The transition from Plus to Pro pricing and its impact on revenue is expected to play out slowly, indicating a gradual realization of benefits.

Q & A Highlights

Q: What are Unity's growth expectations for the next 3 to 5 years? A: Matthew Bromberg, CEO, expressed optimism about Unity's long-term value, emphasizing their unique position in the 3D content creation and interactive entertainment industry. He highlighted Unity's role as a tools provider that can fundamentally change content creation, allowing for more efficient and innovative projects. Unity aims to leverage its platform to offer insights and tools that no other company can, driving growth beyond the mobile gaming industry.