Unity Announces Third Quarter 2022 Financial Results

Unity delivered $322.9 million in revenue during the third quarter of 2022, up 13% year-over-year

Unity Software Inc. (NYSE: U), the world’s leading platform for creating and growing interactive, real-time 3D (RT3D) content, today announced third quarter 2022 financial results, including revenue of $322.9 million, which is up 13% from the same period in 2021.

“The third quarter came in line with guidance for revenue and non-GAAP operating income, and we are taking a prudent approach in the fourth quarter, given the current macroeconomic environment,” said Luis Visoso, Chief Financial Officer, Unity. “We have carefully managed costs this year, and will drive more efficiencies next year, as we continue to capture the large opportunity in front of us.”

“We delivered a solid quarter, with very strong results in Create, reinforcing the value we bring in core gaming and digital twins, and saw continued progress in Operate,” said John Riccitiello, President and Chief Executive Officer, Unity. “We welcome everyone at ironSource to Unity as we build a transformational end-to-end platform that will create value for Creators and our shareholders. We believe that the combination positions us for success in today’s challenging ad market, and for when markets begin their rebound.”

Third Quarter 2022 Financial Highlights

  • Revenue was $322.9 million, an increase of 13% from the third quarter of 2021.
  • Create Solutions revenue was $128.6 million, an increase of 54%; Operate Solutions revenue was $171.7 million, a decrease of 7%; Strategic Partnerships and Other revenue was $22.6 million, an increase of 28%, each as compared to the third quarter of 2021.
  • Loss from operations was $239.6 million, or 74% of revenue, compared to loss from operations of $126.8 million, or 44% of revenue, in the third quarter of 2021.
  • Non-GAAP loss from operations was $37.4 million, or 12% of revenue, compared to a non-GAAP loss from operations of $6.2 million, or 2% of revenue, in the third quarter of 2021.
  • Basic and diluted net loss per share was $0.84, compared to basic and diluted net loss per share of $0.41 in the third quarter of 2021.
  • Basic and diluted non-GAAP net loss per share was $0.14, compared to basic and diluted non-GAAP net loss per share of $0.03 in the third quarter of 2021.
  • 1,075 customers each generated more than $100,000 of revenue in the trailing 12 months as of September 30, 2022, compared to 973 as of September 30, 2021.
  • Dollar-based net expansion rate as of September 30, 2022 was 111% as compared to 142% as of September 30, 2021.
  • Net cash used in operating activities was $68.8 million for the third quarter of 2022, compared to $43.6 million provided for the same period last year. Free cash flow in the third quarter of 2022 was $(80.8) million, compared to $34.2 million for the same period last year. Cash, cash equivalents, and restricted cash were $1.3 billion as of September 30, 2022, compared to $0.8 billion as of September 30, 2021.

Recent Business Highlights

  • Unity Completes Merger with ironSource. Unity announced that it has completed the merger with ironSource, becoming the industry’s only end-to-end platform for mobile app creators. The transformational merger allows Unity to support developers through the entire development lifecycle as they build, run, and grow immersive, real-time games and 3D experiences into successful businesses. ironSource’s depth and breadth of tools and services are unmatched in the industry. The combined company is expected to be highly profitable and generate positive free cash flow.
  • Unity Launches Self-Serve Features for Game Server Hosting and Matchmaker. To give studios of all sizes immediate access to foundational building tools that will help accelerate multiplayer development and deliver the best connected gaming experiences, Unity launched new self-serve features for Game Server Hosting and Matchmaker. Announced in tandem with the Multiplayer Gaming Demand Report, Unity is helping developers better understand both player demand and preferences for multiplayer games given that more than half of the global population (52%) now play games, and a majority of those gamers (77%) play multiplayer games.
  • Unity Announces New Pricing for Unity Pro and Unity Enterprise Plans. Unity announced updates for its pricing of Unity Pro, Unity Enterprise, and Unity Industrial Collection, marking the first price increase in nearly three years.
  • Unity SyncSketch Raises the Technical Bar in HBO Max’s “Raised by Wolves.” An HBO Max show from Executive Producer Ridley Scott, which has a very high bar for visual quality in their futuristic sci-fi world, relied on Unity’s SyncSketch to collaborate on nearly 3,000 complex visual-effects shots with a geographically distributed team.
  • Tilbury Douglas launches Connect Configurator with Unity. Tilbury Douglas launched a first-of-its-kind digital solution with Unity to help drive digital innovation within the construction industry. The Connect Configurator is a game-changer for designing buildings as it provides a web-based application for smarter and more efficient creation of concept designs using approved standardized layouts. The flexible platform can design whole buildings, by placing individual rooms which include building components.
  • Orlando Economic Partnership Unveils World’s First Digital Twin of an Entire Region with Unity. Unity created the digital twin project that reproduces a virtual 800 square miles of Orange, Seminole and Osceola counties in the state of Florida. While other cities’ digital twins have singular applications for smaller areas, the technology for the Orlando region has nearly unlimited uses and sets a new standard for the future of urban planning.

Outlook

Unity is providing the following guidance for the fourth quarter and for the full year ending December 31, 2022.

 

Q4 2022

 

2022

 

Guidance

 

Guidance

Revenue (in millions)

$425M — $445M

 

$1,365 — $1,385

Year-over-year revenue growth

35% — 41%

 

23% — 25%

Non-GAAP income (loss) from operations (in millions)

$5 — $15

 

($88) — ($98)

Non-GAAP operating margin

1% — 3%

 

(6%) — (7%)

Fully diluted shares outstanding

562M

 

562M

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future and cannot be reasonably determined or predicted at this time, although it is important to note that these factors could be material to Unity’s results computed in accordance with GAAP.

Earnings Webcast Details

Unity plans to host a video webcast for analysts and investors today to discuss its third quarter and year-to-date 2022 financial results and outlook for its fourth quarter and full-year 2022. The video webcast is scheduled to begin at 3:00 p.m. Pacific Time/6:00 p.m. Eastern Time and can be accessed at the Unity Investor Relations website at investors.unity.com. The video webcast will be available live, and a replay will be available on the Investor Relations website following completion of the live broadcast for approximately 90 days.

A copy of the prepared remarks for the video webcast has been posted on the Unity Investor Relations website at investors.unity.com, simultaneously with the issuing of this press release.

About Unity

Unity is the world’s leading platform for creating and growing interactive, real-time 3D content. Our platform provides a comprehensive set of software solutions to create, run, and grow interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices. We serve customers of all sizes, at every stage of maturity, from individual creators to large enterprises. For more information, visit unity.com.

Unity uses its Investor Relations website (investors.unity.com), filings with the SEC, press releases, public conference calls, and public webcasts as means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD.

Use of Non-GAAP Financial Measures

Reconciliations of non-GAAP financial measures to Unity’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section of the tables titled “About Non-GAAP Financial Measures.”

Cautionary Statement Regarding Forward-Looking Statements

This press release and the earnings call referencing this press release contain “forward-looking statements,” as that term is defined under federal securities laws, including, but not limited to, statements regarding Unity’s fourth quarter and full-year 2022 outlook and future financial performance, including the growing demand for real-time 3D solutions and services; expectations for success, including our ability to create value for creators and our shareholders; our ability to manage costs and become more efficient; the expected profitability and ability to generate positive free cash flow as a result of the merger with ironSource; business plans, priorities and objectives, potential market and growth opportunities; product features, functionality, and expected benefits to the business and Unity’s customers; competitive position; product strategies and future product and platform features; technological or market trends; and industry environment. The words “believe,” “may,” “will,” “estimate,” “continue,” “intend,” “expect,” “plan,” “project,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. Risks include, but are not limited to: (i) the impact of macroeconomic conditions, such as inflation and actions taken by central banks to counter inflation, and potential economic recession, on our business, as well as our customers, prospects, partners, and service providers; (ii) our ability to achieve profitability and the timing for any such achievement; (iii) our ability to retain existing customers and expand the use of our platform; (iv) our ability to further expand into new industries and attract new customers; (v) the impact of any changes of terms of service, policies or technical requirements from operating system platform providers or application stores which may result in changes to our or our customers’ business practices; (vi) our ability to maintain favorable relationships with hardware, operating system, device, game console and other technology providers; (vii) our ability to compete effectively in the markets in which we participate; (viii) breaches in our security measures, unauthorized access to our platform, our data, or our customers’ or other users’ personal data; (ix) our ability to manage growth effectively; (x) the rapidly changing and increasingly stringent laws, contractual obligations and industry standards that relate to privacy, data security and the protection of children; (xi) our belief that the ironSource merger will create value for our creators and our shareholders, and positions us for success in today’s challenging ad market, and for when markets begin their rebound, and (xii) our ability to successfully integrate ironSource’s technology and business and realize the intended benefits from the ironSource merger, and related costs and expenses. Further information on these and additional risks that could affect Unity’s results is included in our filings with the Securities and Exchange Commission (SEC), including our Quarterly Report on Form 10-K filed with the SEC on August 9, 2022, and our future reports that we may file with the SEC from time to time, which could cause actual results to vary from expectations. Copies of reports filed with the SEC are available on the Unity Investor Relations website. Statements herein speak only as of the date of this release, and Unity assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release except as required by law.

© 2022 Unity Software Inc. All rights reserved. The Unity design logos, “Unity” and our other registered or common law trademarks, service marks, or trade names are the property of Unity Software Inc. or its affiliates. Other trade names, trademarks, and service marks are the property of their respective owners.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP) we use certain non-GAAP financial measures, as described below, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe the following non-GAAP measures are useful in evaluating our operating performance. We are presenting these non-GAAP financial measures because we believe, when taken collectively, they may be helpful to investors because they provide consistency and comparability with past financial performance. In the future, we may also exclude non-recurring expenses and other expenses that do not reflect our overall operating results.

However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for our consolidated financial statements presented in accordance with GAAP.

Non-GAAP Gross Profit, Non-GAAP Operating Expenses, and Non-GAAP Loss from Operations

We define non-GAAP gross profit as gross profit excluding stock-based compensation expense, employer tax related to employee stock transactions, amortization of acquired intangible assets expense, and restructuring charges. We define non-GAAP research and development expense and non-GAAP sales and marketing expense as research and development expense and sales and marketing expense, respectively, excluding stock-based compensation expense, employer tax related to employee stock transactions, amortization of acquired intangible assets expense, acquisition-related costs and restructuring charges. We define non-GAAP general and administrative expense as general and administrative expense excluding stock-based compensation expense, employer tax related to employee stock transactions, costs incurred in connection with the formation of Unity China, acquisition-related costs, restructuring charges, and a one-time expense for the termination of a future lease agreement. We define non-GAAP loss from operations as loss from operations excluding stock-based compensation expense, employer tax related to employee stock transactions, amortization of acquired intangible assets expense, costs incurred in connection with the formation of Unity China, acquisition-related costs, restructuring charges, and a one-time expense for the termination of a future lease agreement.

We use non-GAAP gross profit and non-GAAP loss from operations in conjunction with traditional GAAP measures to evaluate our financial performance. We believe that non-GAAP gross profit and non-GAAP loss from operations provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as these metrics exclude stock-based compensation expense, employer tax related to employee stock transactions, amortization of acquired intangible assets expense, costs incurred in connection with the formation of Unity China, acquisition-related costs, restructuring charges, and a one-time expense for the termination of a future lease agreement, which we do not consider to be indicative of our overall operating performance.

Non-GAAP gross profit, non-GAAP operating expenses and non-GAAP loss from operations have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • they exclude expense associated with our equity compensation plan, although equity compensation has been, and will continue to be, an important part of our compensation strategy;
  • non-GAAP research and development expense, non-GAAP sales and marketing expense, non-GAAP gross profit, and non-GAAP loss from operations exclude the expense of amortization of acquired intangible assets, and although these are non-cash expenses, the assets being amortized may have to be replaced in the future and the aforementioned non-GAAP measures do not reflect cash expenditure for such replacements;
  • they exclude costs incurred in connection with the formation of Unity China;
  • they exclude costs incurred from our acquisitions;
  • they exclude costs incurred from restructuring activities that we initiated during the nine months ended September 30, 2022;
  • non-GAAP loss from operations excludes the one-time expense for the termination of a future lease agreement, although there is no guarantee that the company will not incur similar expenses in the future; and
  • the expenses and other items that we exclude in our calculation of non-GAAP gross profit, non-GAAP operating expenses, and non-GAAP loss from operations may differ from the expenses and other items, if any, that other companies may exclude from this measure or similarly titled measures, which reduces their usefulness as comparative measures.

Non-GAAP Net Loss and Non-GAAP Net Loss per Share

We define non-GAAP net loss and non-GAAP net loss per share as net loss and net loss per share excluding stock-based compensation expense, employer tax related to employee stock transactions, amortization of acquired intangible assets expense, costs incurred in connection with the formation of Unity China, acquisition-related costs, restructuring charges, and a one-time expense for the termination of a future lease agreement, as well as the related tax effects of these items. We use non-GAAP net loss and non-GAAP net loss per share in conjunction with traditional GAAP measures to evaluate our financial performance. We believe that these non-GAAP measures provide our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations.

Non-GAAP net loss and non-GAAP net loss per share have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • they exclude expense associated with our equity compensation plan, although equity compensation has been, and will continue to be, an important part of our compensation strategy;
  • they exclude the expense of amortization of acquired intangible assets, and although these are non-cash expenses, the assets being amortized may have to be replaced in the future and non-GAAP loss from operations does not reflect cash expenditure for such replacements;
  • they exclude costs incurred in connection with the formation of Unity China;
  • they exclude the costs incurred from our acquisitions;
  • they exclude costs incurred from restructuring activities that we initiated during the nine months ended September 30, 2022;
  • they exclude the one-time expense for the termination of a future lease agreement, although there is no guarantee that the company will not incur similar expenses in the future;
  • as further described below, we must make certain assumptions in order to determine the income tax effect adjustment for non-GAAP net loss, which assumptions may not prove to be accurate; and
  • the expenses and other items that we exclude in our calculation of non-GAAP net loss and non-GAAP net loss per share may differ from the expenses and other items, if any, that other companies may exclude from this measure or similarly titled measures, which reduces their usefulness as comparative measures.

Income Tax Effects of Non-GAAP Adjustments

We utilize a fixed annual projected tax rate in our computation of non-GAAP income tax effects to provide better consistency across interim reporting periods. In projecting this non-GAAP tax rate, we utilize a financial projection that excludes the direct impact of the non-GAAP adjustments described above, and eliminates the effects of those items which can vary in size and frequency. The projected rate considers other factors such as our current operating structure, existing tax positions in various jurisdictions, and key legislation in major jurisdictions where we operate. For the year ended December 31, 2021, the non-GAAP tax rate was (22)%. For the year ending December 31, 2022, we have determined the projected non-GAAP tax rate to be (10)%. We will periodically re-evaluate this tax rate, as necessary, for significant events, relevant tax law changes, material changes in the forecasted geographic earnings mix, and any significant acquisitions.

Free Cash Flow

We define free cash flow as net cash provided by (used in) operating activities less cash used for purchases of property and equipment. We believe that free cash flow is a useful indicator of liquidity as it measures our ability to generate cash, or our need to access additional sources of cash, to fund operations and investments.

Free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

  • it is not a substitute for net cash provided by (used in) operating activities;
  • other companies may calculate free cash flow or similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison; and
  • the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.

EBITDA

We define EBITDA as Earnings before Interest, Taxes, Depreciation and Amortization. We believe EBITDA is useful in evaluating our operating performance.

Key Metrics

We monitor the following key metrics to help us evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions.

Customers Contributing More Than $100,000 of Revenue

We focus on the number of customers that generated more than $100,000 of revenue in the trailing 12 months, as this segment of our customer base represents the majority of our revenue and revenue growth. We define a customer as an individual or entity that generated revenue during the measurement period. A single organization with multiple divisions, segments, or subsidiaries is generally counted as a single customer, even though we may enter into commercial agreements with multiple parties within that organization.

Dollar-Based Net Expansion Rate

We track our performance by measuring our dollar-based net expansion rate, which compares our Create and Operate Solutions revenue from the same set of customers across comparable periods, calculated on a trailing 12-month basis. Our dollar-based net expansion rate as of a period end is calculated as current period revenue divided by prior period revenue. Prior period revenue is the trailing 12-month revenue measured as of such prior period end and includes revenue from all customers that contributed revenue during such trailing 12-month period. Current period revenue is the trailing 12-month revenue from these same customers as of the current period end. Our dollar-based net expansion rate includes the effect of any customer renewals, expansion, contraction, and churn but excludes revenue from new customers in the current period.

Source: Unity

 

UNITY SOFTWARE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

 

 

 

 

 

As of

 

September 30,

2022

 

December 31,

2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,239,337

 

 

$

1,055,776

 

Marketable securities

 

446,766

 

 

 

681,323

 

Accounts receivable, net

 

316,337

 

 

 

340,491

 

Prepaid expenses and other

 

81,960

 

 

 

73,520

 

Total current assets

 

2,084,400

 

 

 

2,151,110

 

Property and equipment, net

 

112,458

 

 

 

106,106

 

Goodwill

 

1,657,863

 

 

 

1,620,127

 

Intangible assets, net

 

724,926

 

 

 

814,386

 

Other assets

 

147,514

 

 

 

149,617

 

Total assets

$

4,727,161

 

 

$

4,841,346

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

14,182

 

 

$

14,009

 

Accrued expenses and other

 

221,931

 

 

 

233,976

 

Publisher payables

 

172,646

 

 

 

237,637

 

Deferred revenue

 

202,984

 

 

 

140,528

 

Total current liabilities

 

611,743

 

 

 

626,150

 

Convertible notes

 

1,706,403

 

 

 

1,703,035

 

Long-term deferred revenue

 

118,170

 

 

 

15,945

 

Other long-term liabilities

 

88,159

 

 

 

101,825

 

Total liabilities

 

2,524,475

 

 

 

2,446,955

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.000005 par value;

 

 

 

Authorized shares - 1,000,000 and 1,000,000

 

 

 

Issued and outstanding shares - 300,588 and 292,592

 

2

 

 

 

2

 

Additional paid-in capital

 

4,179,621

 

 

 

3,729,874

 

Accumulated other comprehensive loss

 

(13,576

)

 

 

(3,858

)

Accumulated deficit

 

(1,963,361

)

 

 

(1,331,627

)

Total stockholders' equity

 

2,202,686

 

 

 

2,394,391

 

Total liabilities and stockholders’ equity

$

4,727,161

 

 

$

4,841,346

 

 

UNITY SOFTWARE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue

$

322,881

 

 

$

286,328

 

 

$

940,050

 

 

$

794,662

 

Cost of revenue

 

111,903

 

 

 

63,517

 

 

 

302,572

 

 

 

179,976

 

Gross profit

 

210,978

 

 

 

222,811

 

 

 

637,478

 

 

 

614,686

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

248,380

 

 

 

178,413

 

 

 

685,380

 

 

 

486,644

 

Sales and marketing

 

109,639

 

 

 

97,425

 

 

 

314,486

 

 

 

242,106

 

General and administrative

 

92,585

 

 

 

73,723

 

 

 

246,065

 

 

 

272,772

 

Total operating expenses

 

450,604

 

 

 

349,561

 

 

 

1,245,931

 

 

 

1,001,522

 

Loss from operations

 

(239,626

)

 

 

(126,750

)

 

 

(608,453

)

 

 

(386,836

)

Interest expense

 

(1,135

)

 

 

 

 

 

(3,369

)

 

 

(600

)

Interest income and other expense, net

 

2,208

 

 

 

(64

)

 

 

91

 

 

 

1,571

 

Loss before income taxes

 

(238,553

)

 

 

(126,814

)

 

 

(611,731

)

 

 

(385,865

)

Provision for (benefit from) income taxes

 

11,468

 

 

 

(11,662

)

 

 

20,003

 

 

 

(14,911

)

Net loss

 

(250,021

)

 

 

(115,152

)

 

 

(631,734

)

 

 

(370,954

)

Other comprehensive loss, net of taxes:

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

(3,858

)

 

 

(9

)

 

 

(4,205

)

 

 

41

 

Change in unrealized losses on marketable securities

 

206

 

 

 

72

 

 

 

(5,513

)

 

 

(34

)

Comprehensive loss

$

(253,673

)

 

$

(115,089

)

 

$

(641,452

)

 

$

(370,947

)

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

$

(0.84

)

 

$

(0.41

)

 

$

(2.13

)

 

$

(1.32

)

Weighted-average shares used in computation of basic and diluted net loss per share

 

299,062

 

 

 

283,714

 

 

 

296,768

 

 

 

280,080

 

UNITY SOFTWARE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Operating activities

 

 

 

 

 

 

 

Net loss

$

(250,021

)

 

$

(115,152

)

 

$

(631,734

)

 

$

(370,954

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

43,490

 

 

 

15,120

 

 

 

127,598

 

 

 

39,222

 

Stock-based compensation expense

 

154,479

 

 

 

97,317

 

 

 

376,148

 

 

 

249,278

 

Other

 

3,496

 

 

 

3,324

 

 

 

9,386

 

 

 

11,004

 

Changes in assets and liabilities, net of effects of acquisitions:

 

 

 

 

 

 

 

Accounts receivable, net

 

3,385

 

 

 

41,213

 

 

 

21,258

 

 

 

(26,336

)

Prepaid expenses and other

 

(474

)

 

 

9,957

 

 

 

(8,499

)

 

 

(4,821

)

Other assets

 

8,733

 

 

 

(8,960

)

 

 

25,898

 

 

 

(16,713

)

Accounts payable

 

1,556

 

 

 

1,091

 

 

 

974

 

 

 

(183

)

Accrued expenses and other

 

9,825

 

 

 

35,473

 

 

 

(6,643

)

 

 

39,443

 

Publisher payables

 

(24,985

)

 

 

(22,682

)

 

 

(64,991

)

 

 

16,417

 

Other long-term liabilities

 

(8,011

)

 

 

(14,617

)

 

 

(27,506

)

 

 

(18,072

)

Deferred revenue

 

(10,273

)

 

 

1,539

 

 

 

167,741

 

 

 

9,775

 

Net cash provided by (used in) operating activities

 

(68,800

)

 

 

43,623

 

 

 

(10,370

)

 

 

(71,940

)

Investing activities

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

(5,051

)

 

 

(150,911

)

 

 

(295,859

)

Proceeds from principal repayments on marketable securities

 

28,200

 

 

 

3,229

 

 

 

58,883

 

 

 

14,853

 

Maturities of marketable securities

 

115,110

 

 

 

61,800

 

 

 

315,776

 

 

 

229,800

 

Purchases of non-marketable investments

 

 

 

 

 

 

 

(15,000

)

 

 

(4,600

)

Sales of non-marketable investments

 

 

 

 

 

 

 

1,000

 

 

 

 

Purchases of property and equipment

 

(11,987

)

 

 

(9,408

)

 

 

(42,344

)

 

 

(27,959

)

Business acquisitions, net of cash acquired, and other

 

(193

)

 

 

(355,768

)

 

 

(25,840

)

 

 

(425,198

)

Net cash provided by (used in) investing activities

 

131,130

 

 

 

(305,198

)

 

 

141,564

 

 

 

(508,963

)

Financing activities

 

 

 

 

 

 

 

Proceeds from issuance of common stock from employee equity plans

 

18,766

 

 

 

15,091

 

 

 

56,484

 

 

 

53,150

 

Net cash provided by financing activities

 

18,766

 

 

 

15,091

 

 

 

56,484

 

 

 

53,150

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

(4,144

)

 

 

(31

)

 

 

(4,185

)

 

 

58

 

Increase (decrease) in cash, cash equivalents, and restricted cash

 

76,952

 

 

 

(246,515

)

 

 

183,493

 

 

 

(527,695

)

Cash and restricted cash, beginning of period

 

1,173,140

 

 

 

1,012,767

 

 

 

1,066,599

 

 

 

1,293,947

 

Cash, cash equivalents, and restricted cash, end of period

$

1,250,092

 

 

$

766,252

 

 

$

1,250,092

 

 

$

766,252

 

 

UNITY SOFTWARE INC.

RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES

(In thousands, except percentages and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

Gross profit reconciliation

 

 

 

 

 

 

 

GAAP gross profit

$

210,978

 

 

$

222,811

 

 

$

637,478

 

 

$

614,686

 

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

 

18,097

 

 

 

7,780

 

 

 

38,730

 

 

 

18,237

 

Employer tax related to employee stock transactions

 

655

 

 

 

975

 

 

 

2,248

 

 

 

4,247

 

Amortization of intangible assets expense

 

7,713

 

 

 

 

 

 

22,898

 

 

 

 

Restructuring charges

 

 

 

 

 

 

 

264

 

 

 

 

Non-GAAP gross profit

$

237,443

 

 

$

231,566

 

 

$

701,618

 

 

$

637,170

 

GAAP gross margin

 

65

%

 

 

78

%

 

 

68

%

 

 

77

%

Non-GAAP gross margin

 

74

%

 

 

81

%

 

 

75

%

 

 

80

%

 

 

 

 

 

 

 

 

Operating expenses reconciliation

 

 

 

 

 

 

 

Research and development

 

 

 

 

 

 

 

GAAP research and development expense

$

248,380

 

 

$

178,413

 

 

$

685,380

 

 

$

486,644

 

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

 

(81,490

)

 

 

(49,169

)

 

 

(186,724

)

 

 

(114,046

)

Employer tax related to employee stock transactions

 

(2,378

)

 

 

(6,759

)

 

 

(10,107

)

 

 

(20,206

)

Amortization of intangible assets expense

 

(18,765

)

 

 

(4,304

)

 

 

(55,391

)

 

 

(10,817

)

Acquisition-related costs

 

(40

)

 

 

 

 

 

(40

)

 

 

 

Restructuring charges

 

 

 

 

 

 

 

(1,896

)

 

 

 

Non-GAAP research and development expense

$

145,707

 

 

$

118,181

 

 

$

431,222

 

 

$

341,575

 

GAAP research and development expense as a percentage of revenue

 

77

%

 

 

62

%

 

 

73

%

 

 

61

%

Non-GAAP research and development expense as a percentage of revenue

 

45

%

 

 

41

%

 

 

46

%

 

 

43

%

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 

 

 

 

 

GAAP sales and marketing expense

$

109,639

 

 

$

97,425

 

 

$

314,486

 

 

$

242,106

 

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

 

(31,381

)

 

 

(22,168

)

 

 

(78,409

)

 

 

(48,728

)

Employer tax related to employee stock transactions

 

(493

)

 

 

(1,611

)

 

 

(2,491

)

 

 

(4,696

)

Amortization of intangible assets expense

 

(6,941

)

 

 

(2,840

)

 

 

(20,963

)

 

 

(5,495

)

Acquisition-related costs

 

(19

)

 

 

 

 

 

(19

)

 

 

 

Restructuring charges

 

 

 

 

 

 

 

(1,582

)

 

 

 

Non-GAAP sales and marketing expense

$

70,805

 

 

$

70,806

 

 

$

211,022

 

 

$

183,187

 

GAAP sales and marketing expense as a percentage of revenue

 

34

%

 

 

34

%

 

 

33

%

 

 

30

%

Non-GAAP sales and marketing expense as a percentage of revenue

 

22

%

 

 

25

%

 

 

22

%

 

 

23

%

General and administrative

 

 

 

 

 

 

 

GAAP general and administrative expense

$

92,585

 

 

$

73,723

 

 

$

246,065

 

 

$

272,772

 

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

 

(23,511

)

 

 

(18,200

)

 

 

(60,038

)

 

 

(68,267

)

Employer tax related to employee stock transactions

 

(282

)

 

 

(869

)

 

 

(1,742

)

 

 

(3,649

)

Costs incurred in connection with the formation of Unity China

 

(909

)

 

 

 

 

 

(5,554

)

 

 

 

Acquisition-related costs

 

(9,517

)

 

 

(5,923

)

 

 

(14,035

)

 

 

(9,269

)

Restructuring charges

 

 

 

 

 

 

 

(1,893

)

 

 

 

Lease termination expense

 

 

 

 

 

 

 

 

 

 

(49,795

)

Non-GAAP general and administrative expense

$

58,366

 

 

$

48,731

 

 

$

162,803

 

 

$

141,792

 

GAAP general and administrative expense as a percentage of revenue

 

29

%

 

 

26

%

 

 

26

%

 

 

34

%

Non-GAAP general and administrative expense as a percentage of revenue

 

18

%

 

 

17

%

 

 

17

%

 

 

18

%

 

 

 

 

 

 

 

 

Loss from operations reconciliation

 

 

 

 

 

 

 

GAAP loss from operations

$

(239,626

)

 

$

(126,750

)

 

$

(608,453

)

 

$

(386,836

)

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

 

154,479

 

 

 

97,317

 

 

 

363,901

 

 

 

249,278

 

Employer tax related to employee stock transactions

 

3,808

 

 

 

10,214

 

 

 

16,588

 

 

 

32,798

 

Amortization of intangible assets expense

 

33,419

 

 

 

7,144

 

 

 

99,252

 

 

 

16,312

 

Costs incurred in connection with the formation of Unity China

 

909

 

 

 

 

 

 

5,554

 

 

 

 

Acquisition-related costs

 

9,576

 

 

 

5,923

 

 

 

14,094

 

 

 

9,269

 

Restructuring charges

 

 

 

 

 

 

 

5,635

 

 

 

 

Lease termination expense

 

 

 

 

 

 

 

 

 

 

49,795

 

Non-GAAP loss from operations

$

(37,435

)

 

$

(6,152

)

 

$

(103,429

)

 

$

(29,384

)

GAAP operating margin

 

(74

)%

 

 

(44

)%

 

 

(65

)%

 

 

(49

)%

Non-GAAP operating margin

 

(12

)%

 

 

(2

)%

 

 

(11

)%

 

 

(4

)%

Net loss and net loss per share reconciliation

 

 

 

 

 

 

 

GAAP net loss

$

(250,021

)

 

$

(115,152

)

 

$

(631,734

)

 

$

(370,954

)

Add:

 

 

 

 

 

 

 

Stock-based compensation expense

 

154,479

 

 

 

97,317

 

 

 

363,901

 

 

 

249,278

 

Employer tax related to employee stock transactions

 

3,808

 

 

 

10,214

 

 

 

16,588

 

 

 

32,798

 

Amortization of intangible assets expense

 

33,419

 

 

 

7,144

 

 

 

99,252

 

 

 

16,312

 

Costs incurred in connection with the formation of Unity China

 

909

 

 

 

 

 

 

5,554

 

 

 

 

Acquisition-related costs

 

9,576

 

 

 

5,923

 

 

 

14,094

 

 

 

9,269

 

Restructuring charges

 

 

 

 

 

 

 

5,635

 

 

 

 

Lease termination expense

 

 

 

 

 

 

 

 

 

 

49,795

 

Income tax effect of non-GAAP adjustments

 

7,832

 

 

 

(13,030

)

 

 

9,332

 

 

 

(21,162

)

Non-GAAP net loss

$

(39,998

)

 

$

(7,584

)

 

$

(117,378

)

 

$

(34,664

)

GAAP net loss per share attributable to our common stockholders, basic and diluted

$

(0.84

)

 

$

(0.41

)

 

$

(2.13

)

 

$

(1.32

)

Total impact on net loss per share, basic and diluted, from non-GAAP adjustments

 

0.70

 

 

 

0.38

 

 

 

1.73

 

 

 

1.20

 

Non-GAAP net loss per share attributable to our common stockholders, basic and diluted

$

(0.14

)

 

$

(0.03

)

 

$

(0.40

)

 

$

(0.12

)

 

 

 

 

 

 

 

 

Weighted-average common shares used in GAAP net loss per share computation, basic and diluted

 

299,062

 

 

 

283,714

 

 

 

296,768

 

 

 

280,080

 

Weighted-average common shares used in non-GAAP net loss per share computation, basic and diluted

 

299,062

 

 

 

283,714

 

 

 

296,768

 

 

 

280,080

 

 

 

 

 

 

 

 

 

Free cash flow reconciliation

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

(68,800

)

 

$

43,623

 

 

$

(10,370

)

 

$

(71,940

)

Less:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(11,987

)

 

 

(9,408

)

 

 

(42,344

)

 

 

(27,959

)

Free cash flow

$

(80,787

)

 

$

34,215

 

 

$

(52,714

)

 

$

(99,899

)

Net cash provided by (used in) investing activities

$

131,130

 

 

$

(305,198

)

 

$

141,564

 

 

$

(508,963

)

Net cash provided by financing activities

$

18,766

 

 

$

15,091

 

 

$

56,484

 

 

$

53,150

 

 

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