Revenue Performance - Total revenue for the year ended December 31, 2024, was $1,813,255, a decrease of 17% compared to $2,187,317 in 2023[240]. - Create Solutions revenue decreased to $613,966 in 2024 from $859,174 in 2023, primarily due to the termination of a subscription agreement with Wētā FX Limited, which accounted for approximately $99 million in the fourth quarter of 2023[245]. - Grow Solutions revenue also declined to $1,199,289 in 2024 from $1,328,143 in 2023, impacted by competition and the return of customer incentives from ironSource[246]. - The dollar-based net expansion rate as of December 31, 2024, was 96%, down from 100% in 2023, primarily due to decreases in Grow Solutions revenue[237]. - The company recognized approximately $90 million in revenue from non-strategic portfolios in 2024, which is expected to decline throughout 2025[229]. - Total revenue for Unity Software Inc. in 2024 was $1,813,255, a decrease of 17.0% compared to $2,187,317 in 2023[308]. - Create Solutions revenue decreased to $614.0 million in 2024 from $859.2 million in 2023, while Grow Solutions revenue decreased to $1,199.3 million from $1,328.1 million[379]. Financial Performance - Gross profit for the year ended December 31, 2024, was $1,332,402, with a gross margin of 73%, compared to 66% in 2023[240][241]. - The net loss for the year ended December 31, 2024, was $664,287, compared to a net loss of $826,322 in 2023[240]. - Adjusted gross profit for the year ended December 31, 2024 was $1,509,315, compared to $1,801,488 in 2023, with an adjusted gross margin of 83%[269]. - Unity Software Inc. reported a comprehensive loss of $669,831 in 2024, compared to $830,589 in 2023, reflecting a 19.4% improvement[311]. - Net loss attributable to Unity Software Inc. for 2024 was $664,114, compared to a net loss of $822,011 in 2023, indicating a 19.2% improvement[308]. - Basic and diluted net loss per share for 2024 was $1.68, an improvement from $2.16 in 2023[308]. Operating Expenses - Operating expenses totaled $2,087,551 in 2024, a decrease from $2,286,389 in 2023, with significant reductions in research and development costs[240]. - Employee separation costs amounted to approximately $214 million in 2024, related to workforce reductions and modifications of equity awards[230]. - Research and development expenses for 2024 were $924,830, down from $1,053,588 in 2023, a decrease of 12.2%[308]. - Sales and marketing expenses decreased to $752,649 in 2024 from $834,625 in 2023, a decline of 9.8%[308]. - General and administrative expenses increased for the year ended December 31, 2024, primarily due to higher personnel-related costs from employee separation[258]. Cash Flow and Liquidity - Free cash flow for the year ended December 31, 2024 was $286,004, compared to $178,779 in 2023, indicating improved liquidity[272]. - As of December 31, 2024, Unity's cash and cash equivalents totaled $1.5 billion, primarily held for working capital purposes[273]. - Net cash provided by operating activities for the year ended December 31, 2024, was $315,553 thousand, an increase from $234,700 thousand in 2023[280]. - The company anticipates that existing liquidity sources will be sufficient for at least the next 12 months, but may require additional equity or debt financing sooner than expected[278]. - Cash, cash equivalents, and restricted cash totaled $1,527.9 million as of December 31, 2024, compared to $1,604.3 million in 2023[386]. Strategic Focus and Workforce - The company plans to focus on its core businesses, the Unity Engine and related consumption services, while narrowing investments in new businesses[229]. - In January 2024, Unity committed to eliminating approximately 25% of its workforce, incurring incremental employee separation costs of approximately $214 million in 2024[252]. - Research and development expenses are expected to increase in the long term as Unity expands its teams, but are projected to decrease in the short term due to a reset of the Strategic Portfolio[253]. Assets and Liabilities - Total assets decreased to $6,737,407 in 2024 from $7,243,441 in 2023, a decline of 7.0%[305]. - Total liabilities decreased to $3,310,259 in 2024 from $3,829,063 in 2023, a reduction of 13.5%[305]. - The company had cash and cash equivalents of $1,517,672 as of December 31, 2024, down from $1,590,325 in 2023, a decrease of 4.6%[305]. - The company reported a depreciation and amortization expense of $408.980 million in 2024, down from $563.916 million in 2023[319]. Legal and Compliance - The company is involved in multiple legal proceedings, including a securities class action and derivative suits, but believes these will not have a material adverse effect on its business[414]. - The company intends to vigorously defend itself against the allegations in the ongoing litigation[413].

Core Insights - Unity's fourth-quarter revenue fell 25% year over year, with Create Solutions segment revenue down 47% and Grow Solutions revenue declining 5% [1][2] - The company's portfolio reset, which involved exiting certain businesses, contributed significantly to the sales decline, although it exceeded analyst expectations [2] - Despite disappointing guidance for the first quarter, Unity's stock surged, indicating potential signs of a turnaround [3] Revenue Performance - Create Solutions revenue would have still declined 20% even without the termination of a deal with Wētā FX [1] - Subscription revenue increased by 15% year over year in the fourth quarter, supported by the launch of Unity 6 [4] - Unity reported a 50% increase in revenue within its industry segment, targeting non-gaming sectors like automotive [5] Advertising Business - Unity is migrating its ad network to Unity Vector, a new AI platform aimed at optimizing ad performance [6] - The rebuilding of the advertising business is expected to take time, with CEO Matthew Bromberg indicating that immediate benefits from the Vector platform are unlikely [7] Financial Health - Unity is generating positive free cash flow despite significant revenue declines and negative net income, with over $1.5 billion in cash at the end of 2024 [8] - The gap between earnings and cash flow is primarily due to stock-based compensation and amortization of intangible assets [8] Long-term Outlook - Unity's cancellation of the Runtime Fee and efforts to rebuild trust with developers are seen as positive steps for long-term growth [9] - The current market capitalization of around $11 billion may appear unjustified, but the company's dominant position in the video game engine market and potential in advertising could make it an attractive turnaround stock [10]

Group 1 - The article discusses the potential for investing in undervalued stocks that are mispriced by the market as of the end of February [1] - It suggests that investors should consider joining a specific service, Out Fox The Street, for insights on these investment opportunities [1] Group 2 - There are no specific companies or stocks mentioned in the article, and it emphasizes the importance of conducting personal research before making investment decisions [2][3][4]

Core Viewpoint - Unity Software has demonstrated strong earnings performance, exceeding expectations in both revenue and profitability, which positions the company favorably for future growth [2][9]. Financial Performance - Unity reported sales of $457 million, surpassing estimates of $433 million, and achieved EBITDA of $106 million, significantly exceeding Wall Street's expectations of $85 million [2]. - The company's Q4 results reflect successful efforts to strengthen Unity, driven by the success of Unity 6, a new pricing model, and increased AI integration [2]. Stock Movement - Unity's stock experienced a significant gap up, indicating strong investor interest, supported by a high short interest of approximately 8% of the float and a bullish technical pattern [3]. - The stock is attempting to break out of a double-bottom base structure, with trading volume swelling to about 900% above the 50-day average [3]. Strategic Partnerships - In 2023, Unity partnered with Apple to develop 3D applications for the Vision Pro headset, contributing to the growth of Unity's business with Apple [6]. - Successful projects include the Don Julio App and LEGO Builder's Journey, showcasing Unity's capabilities in creating immersive experiences [6]. Management Changes - Unity has addressed investor concerns regarding management uncertainties by hiring key leadership positions, including a new CTO and CFO [7]. Growth Drivers - The advancements in AI technology are expected to play a crucial role in driving growth for Unity, enhancing the efficiency and cost-effectiveness of its gaming segment [8].

Core Insights - Unity Software's stock experienced a significant increase of 28% during Thursday's trading, despite broader market declines in the S&P 500 and Nasdaq Composite [1] - The company reported fourth-quarter results that exceeded market expectations, both in terms of sales and earnings, and provided forward guidance that surpassed Wall Street targets [2] Financial Performance - In Q4, Unity reported a loss per share of $0.30 on sales of $457.1 million, outperforming analyst estimates of a $0.37 loss on $433.47 million in sales [3] - Revenue for the quarter was down 25% year over year, but the core strategic portfolio sales increased by 4% year over year to $423 million [3] Future Guidance - For Q1, Unity projects sales between $405 million and $415 million, with non-GAAP adjusted EBITDA expected to be between $60 million and $65 million [4] - The midpoint sales guidance indicates a sequential quarterly decline of approximately 10%, attributed to the rollout of the Unity Vector AI platform, which is anticipated to drive long-term growth despite short-term sales cannibalization [5]

Financial Data and Key Metrics Changes - Unity's revenue from the strategic portfolio was $442 million, up 4% year-over-year, exceeding guidance by $15 million [29] - Adjusted EBITDA for Q4 was $106 million, representing 23% margins, exceeding guidance by 26% [33] - Free cash flow for Q4 was $106 million, up 74% from $61 million in the prior year [34] Business Line Data and Key Metrics Changes - Create solutions revenue was $139 million, up 9% year-over-year, driven by a 15% increase in subscription revenues [29][30] - Grow solutions revenue was $303 million, up 2% year-over-year, marking the best quarter in the past year [31] - Industry segment revenue grew by 50%, making it the fastest-growing subscription business [22] Market Data and Key Metrics Changes - Unity maintained its position as the top game engine, with 70% of the top 1,000 mobile games made with Unity [19] - Unity 6 has been downloaded 2.8 million times since launch, with 38% of active users upgrading [18] - Significant partnerships, such as with Google for Android XR, reinforce Unity's market position [21] Company Strategy and Development Direction - Unity is migrating its ad network to a new AI platform called Unity Vector, aimed at enhancing targeting precision and audience scale [13][14] - The company is focusing on organic innovation and gradually de-levering to ensure a conservative balance sheet [27][35] - Unity aims to improve profitability through ongoing margin expansion and operational efficiencies [27][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transformation of Unity and the potential for sustained long-term growth [10][11] - The introduction of Unity Vector is expected to strengthen Unity's competitive position in the coming years [15][16] - Management acknowledged the need for patience as the new platform matures and begins to operate at scale [15][16] Other Important Information - Unity's cash at the end of the quarter was $1.5 billion, with debt at $2.2 billion [35] - The company plans to provide quarterly guidance in 2025 due to rapid changes in the ad business [38] Q&A Session Summary Question: Can you break down the pieces of the Q1 guidance? - Management indicated that the guidance reflects prudence regarding the timing of revenue lift from the transition to Unity Vector [45][46] Question: What are the drivers of the 15% subscription growth? - The growth was attributed to prior price increases and improved customer engagement, not the recent price hikes [50][52] Question: How is the migration to Unity 6 tracking? - The migration is tracking positively, with 38% of users already upgraded, exceeding expectations [56][58] Question: What is the timeline for the new products in Grow solutions? - The first phase of the Unity Vector migration is expected to be complete by the end of Q2 2025, with ongoing improvements thereafter [67][68] Question: How does Unity plan to address competitive challenges? - Unity aims to leverage its extensibility and deep understanding of player behavior to remain competitive [61][62] Question: What are the expectations for the industry business pipeline? - The industry business is expected to continue growing, with a focus on auto, retail, and manufacturing sectors [78][80] Question: How will Vector impact margins and revenue growth? - Management expects Vector to enhance revenue growth and operating leverage, leading to improved margins over time [102]

Core Insights - Unity Software Inc. reported a quarterly loss of $0.30 per share, better than the Zacks Consensus Estimate of a loss of $0.35, and compared to earnings of $0.23 per share a year ago, resulting in an earnings surprise of 14.29% [1] - The company achieved revenues of $457.1 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 5.87%, although this represents a decline from year-ago revenues of $609.27 million [2] - Unity Software has consistently surpassed consensus EPS estimates over the last four quarters, indicating a positive trend in earnings performance [2] Financial Performance - The company has shown a mixed trend in estimate revisions ahead of the earnings release, currently holding a Zacks Rank 3 (Hold), suggesting expected performance in line with the market [6] - The current consensus EPS estimate for the upcoming quarter is -$0.40 on revenues of $433.27 million, and for the current fiscal year, it is -$1.25 on revenues of $1.79 billion [7] Market Context - Unity Software shares have underperformed the market, losing about 4.5% since the beginning of the year, while the S&P 500 has gained 4.5% [3] - The Internet - Software industry, to which Unity belongs, is currently ranked in the top 34% of over 250 Zacks industries, indicating a favorable industry outlook [8]

Revenue Performance - Fourth quarter revenue was $457 million, down 25% year-over-year, primarily due to a portfolio reset[5] - Revenue from the strategic portfolio was $442 million, up 4% year-over-year[5] - Create Solutions revenue was $152 million, down 47% year-over-year, with a 20% decline when excluding the impact of the Wētā FX termination[7] - Grow Solutions revenue was $305 million, down 5% year-over-year, but would have increased by 2% excluding prior customer credits[8] - Full year revenue was $1,813 million, down 17% year-over-year[12] - Revenue for Q4 2024 was $457.1 million, down 25% from $609.3 million in Q4 2023[37] Profitability Metrics - GAAP net loss for the quarter was $123 million, with a margin of (27)%, an improvement from (42)% in the same quarter last year[10] - Adjusted EBITDA for the quarter was $106 million, with a margin of 23%, compared to $186 million and 30% margin in Q4 2023[11] - Full year GAAP net loss was $664 million, with a margin of (37)%, an improvement from (38)% in the previous year[17] - For Q4 2024, Unity reported a net loss of $122.5 million, a decrease from a net loss of $254 million in Q4 2023, representing a 52% improvement year-over-year[30] - Adjusted EBITDA for Q4 2024 was $106.1 million, with an adjusted EBITDA margin of 23%, compared to $185.6 million and 30% in Q4 2023[37] Cash Flow and Liquidity - Free Cash Flow for the quarter was $106 million, compared to $61 million in Q4 2023[12] - The company experienced a net cash provided by operating activities of $112.2 million in Q4 2024, an increase from $72.1 million in Q4 2023[30] - Cash, cash equivalents, and restricted cash at the end of Q4 2024 totaled $1.53 billion, down from $1.60 billion at the end of Q4 2023[30] - Free cash flow for the year ended December 31, 2024, was $286.00 million, compared to $178.78 million for the year ended December 31, 2023, indicating a 60.1% increase[39] Expenses and Cost Management - Stock-based compensation expense for Q4 2024 was $110.2 million, compared to $181 million in Q4 2023, indicating a 39% reduction[37] - GAAP gross profit for Q4 2024 was $341.6 million, with a gross margin of 75%, compared to $347.7 million and 57% in Q4 2023[37] - Non-GAAP cost of revenue for Q4 2024 was $76.1 million, representing 17% of revenue, compared to $86.6 million and 14% in Q4 2023[37] - GAAP research and development expense for Q4 2024 was $217.97 million, a decrease from $265.15 million in Q4 2023, representing a 17.7% decline[39] - GAAP sales and marketing expense for Q4 2024 was $175.75 million, down from $215.37 million in Q4 2023, reflecting a 18.4% reduction[39] - GAAP general and administrative expense for Q4 2024 was $71.50 million, a decrease from $126.13 million in Q4 2023, showing a 43.4% decline[39] Future Outlook and Strategic Initiatives - Q1 2025 guidance projects revenue of $405 to $415 million and adjusted EBITDA of $60 to $65 million[23] - Unity plans to allocate R&D to high-impact initiatives and focus on revenue growth while managing shareholder capital prudently[40] - The company expects to release its new product, Vector, with anticipated improvements and scalability over time[40] - Unity aims to reduce shareholder dilution from stock-based compensation and enhance per share returns[40] - The company anticipates gradual de-leveraging over the next several years[40] - Unity's financial guidance for Q1 2025 will be provided in future communications[40]

Unity Software (U) is scheduled to report its fourth-quarter 2024 results on Feb. 20.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.For the fourth quarter of 2024, the company expects total revenues in the range of $422-$427 million.The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $431.77 million, indicating a 29.13% decrease from the figure reported in the year-ago quarter.The consensus mark is pegged at a loss of 35 cents per share, which remained unchanged ove ...

Company Performance - Unity Software has experienced challenges in managing its customer relationship policies, leading to a need for recovery efforts [1] Stock Information - Unity Software's stock price was recorded at $6 90 on the afternoon of January 26 2025 [1]