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 (U, Financial) 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 (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 (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 (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 (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.
Q: Can you provide insights into the roadmap for Unity's machine learning and data infrastructure development?
A: Bromberg explained that the development process is highly iterative, with new machine learning models being tested on live data. The goal is to ensure these models outperform the old ones across various conditions. Unity is focused on building and validating this capability before launching it when ready, indicating a cautious but optimistic approach to its development.
Q: How has the cancellation of the runtime fee and the launch of Unity 6 impacted customer adoption?
A: Bromberg noted that the cancellation of the runtime fee removed a significant blocker for customers, leading to increased willingness to upgrade to Unity 6. The focus on stability and support has been well-received, with Unity 6 being downloaded over 500,000 times, indicating strong early adoption and positive momentum in customer relationships.
Q: What is Unity's strategy for integrating generative AI into its platform?
A: Bromberg stated that Unity is well-positioned to help developers integrate AI tools, focusing on being an assembly point for 3D assets. Unity aims to use AI to simplify complex tasks and workflows, enhancing the efficiency of game development. The company is excited about the potential of AI to drive innovation and growth in the gaming industry.
Q: How will Unity's recent pricing changes impact future growth?
A: Interim CFO Mark Barrysmith explained that the pricing increases, effective January 1, 2025, will roll out over the year as customers renew or upgrade. This is expected to drive double-digit growth in subscription revenue. Unity plans to implement consistent annual price increases to sustain growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
