Unity Stock Pops Briefly After Earnings
Mobile gaming engine Unity Software (NYSE: U) reported first-quarter earnings results on Tuesday evening, and shares briefly popped by 9% on Wednesday morning. But then the ongoing sell-off among tech stocks resumed, as investors continue to shun growth-oriented companies.
As of 12:45 p.m., the stock had given back all of those gains and was down approximately 1%.
How did Unity do in the first quarter?
Revenue in the first quarter increased 41% to $234.8 million, which was ahead of the consensus estimate of $217.1 million. That resulted in an adjusted net loss of $0.10 per share, which was also better than the $0.12 per share in adjusted losses that Wall Street analysts were modeling for.
Here’s how each business segment fared:
|Segment||Q1’21 Revenue||YOY Growth|
|Create Solutions||$70.4 million||51%|
|Operate Solutions||$146.6 million||40%|
|Strategic Partnerships||$17.8 million||12%|
“Our first quarter results are reflective of the powerful transition from linear 2D to real-time 3D, which is one of the most important changes in how people interact with technology,” CEO John Riccitiello said in a statement. “We believe that real-time 3D will continue to grow at an accelerated pace and achieve massive scale.”
Unity reported a dollar-based net expansion rate of 140%, up from 133% in the year-ago quarter. That metric measures spending from existing customers and shows that Unity is successfully upselling and expanding those relationships. There are now 837 customers that each generated over $100,000 in trailing-12-month (TTM) revenue.
The company also continues to make progress expanding beyond its core market of mobile gaming. During the first quarter, Unity garnered new customers from a variety of new sectors such as automotive, healthcare, government, and retail, among others.
Unity remains confident that the recent changes Apple (NASDAQ: AAPL) rolled out in April regarding Identifier for Advertisers (IDFA) will only have a minimal impact on the company’s advertising business. The Mac maker now prompts users to allow apps to track them for ad targeting purposes, a pro-privacy change that has important implications for the broader advertising industry.
Guidance for the second quarter calls for revenue in the range of $240 million to $245 million, which translates into growth of 30% to 33%. That top-line forecast is ahead of the $232 million in sales analysts are expecting. That should all result in an adjusted operating loss of $30 million to $40 million.
For the full-year 2021, Unity is expecting revenue of $1 billion to $1.02 billion, similarly topping the market’s expectations of $967.2 million in revenue. The company says that its adjusted operating loss for the year should be in the range of $90 million to $100 million.
Unity reiterated its long-term target for 30% annual revenue growth while acknowledging that results can be bumpy during some quarters or years.
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