Unity Software (U) 5 Feb 212020 Q4 Earnings call transcript

Company Profile

Participants

Richard Davis	VP, IR & Strategy
John Riccitiello	CEO, President & Executive Chairman
Kimberly Jabal	SVP & CFO
Yao Chew	Crédit Suisse
Thomas Roderick	Stifel, Nicolaus & Company
Franco Granda	D.A. Davidson & Co.
Brent Bracelin	Piper Sandler & Co.
Mario Lu	Barclays Bank

Call transcript

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Richard Davis

Thank you, and welcome, everyone, to Unity's financial results webcast. Today, we'll be highlighting our results for the fourth quarter and for the full fiscal year of 2020. With me on the call today is John Riccitiello, President, Chief Executive Officer and Executive Chairman; and Kim Jabal, Senior Vice President and Chief Financial Officer.

Now one of our goals on this call is to help investors understand our business model, and we're going to try to do this in an efficient manner.

So after the close, we published a shareholder letter with financial commentary and guidance. we with call, John. remarks this on will brief begin from And we we and investors that answer investors. and Then questions analysts collected will consolidated from -- And XX the panelists finally, ask we'll so to or for last questions. additional time permitting, minutes have

to this first outlook, let's risks, as during and our statement. And participants for call, financial statements, full including we of will outlook fiscal safe of I'd performance about similar So future expectations the harbor the quarter to like assumptions. on remind forward-looking business for go and conference XXXX as financial that be statements which goals, well are uncertainties year items, all subject making and to

of information these SEC in find the to and we remind can at forward-looking sec.gov. more you update And obligation no Now and that revise may about differ, filings or results our any our we undertake actual with Factors risks section everyone uncertainties the Risk statements.

discussing today. be let found of it earnings will non-GAAP John turn can limitations measures non-GAAP discussion introductory to We release. some With financial remarks. press financial for of and over our be Reconciliations GAAP in non-GAAP results measures me also our financial and that, between our

John Riccitiello

where you've you, hope ongoing had Thank and XXXX XXXX the quarter provided guidance. fourth as year our thanks to happy for we us to as our highlights and I for the joining chance support. our today and Richard, for your share we're the year letter, well shareholder Today, and results. quarter read full

times. and you family healthy challenging these are that friends your safe Now hope and we in and

built partners our users the Unity. of the these at operated Unity, team more Our and Unity end extends X,XXX strong, and with by well to wishes customers, than products

X-dimensional history technology in Now we is revolutions early which understand have of followed don't XD. happen you the technology the majority in of case, of organically. digital transition, phases content moving Those believe of and to who world once-in-a-generation a this in real-time a we're that

You agents. need change

hardware innovation real-time a For we're seeing XD, agents. change of software and virtuous cycle

example, of investing making any GPUs, development a future. including active team operated of recognize execution apps prior and among and $XXX Unity a benefited that combination our displays, we're of tailwinds some bandwidth, included the services million new engage around work market X,XXX innovation applications we games, For downloads a the number to $XX We our our XD customers. of the with and with by our built from across the engaging Unity, reality. XD this estimate And devices strong the our that software creators the users of delivering world million, result real-time for At lets and Unity. COVID-related privileged $XXX revenues we and board new change the with top lead of strong the to we In shareholder we built the build Unity's versus our are is great ecosystem, number also of in statistics letter, a in speak or are XG that share content monthly XXXX. monthly endpoint These growth XK platform revs which some with XXXX from a revenues in contributed strong and environments. to our see of and faster total just of net XR to And and of real-time were XXXX. opportunity reported up results realize up QX million, massive XX% year, this XX%

in in times All X.X QX many average Download reached realizing are countries per support. cases, success in XX the in averaged billion an customers XXXX. ecosystem are of market indicative of to amazing thankful these franchise the We're of These of strength hit of we billion our XX%. record metrics X results but MAUs QX, great our record the that don't with the share they in our month revenue translate month X,XXX per levels and reaching top and directly marketplace.

Now applications come studios expand customers from of Unity, beyond improvements services good delivered one like we outcomes We gaming. In we with and Unity, lifetime our and source: at growth. At for customer and operate hundreds metrics game create new core innovation. boundaries for team innovation. our of our upgraded to value introduced XXXX, the helps platform, optimize

at recognition million strong knowing just that a as none and X% And be advertisers Unity. XXXX without and XXXX. to over XX% the to e-commerce million For takes revenue the look innovative the the revenues XXXX, onetime will, take become innovative example, $XXX we're we accustomed operator, had to our real-time me to implemented by of Apple. this which for for underlying XXXX, long-term Kim three, recognition employees dedicated Volkswagen's questions. Richard, We that goal; forward IDFA vertical to in we honor Forma, providing guidance I time, this We're also an $XXX We're of will being in the the reference over or a to of our of December, that, laying year. It's guidance this that foundation two, be projecting which future use of with and estimate in for turn tailwinds; possible our content approach part be due in will to XD. for growth showroom. of virtual world-class we elevated plus, application, like an million hit most the build engaging would COVID multiple factors. and account a X: Today, into and highlighted to incredible I'd -- somewhat approximately the revenues revenue This new is to one, team. $XX world's

Richard Davis

Great. much. Thanks very

Richard Davis

know, collected timing factored into just any what with Well, why expected get our question these XX on you because And the have that business? iOS a do do did you the start want changes? Kim, do so that to is is on we -- our us IDFA. around question And on you on what don't we we update started one? was, guidance? if change, see And what impact IDFA, specifically, questions, we all

Kimberly Jabal

we've much this. preparing Great. With today. related a for joining with we've acquisition, related for all really them they're we of got their been And this monetization say you got their closely their doing IDFA And what customers us that working are to strategies. a think, marketing respect this to do help and to would been I you. you that I long time. by IDFA, to from to of for changes -- is question, require recalibrate Thank of The going our customers all

hard are mitigate contextual and We IDFA. the Unity which does our both to advertising from not risk, GDPR, our learnings leveraging on we're customers. from working rely And to our to product,

rates, million as detailed GDPR. not rates ad at changes So impression about historic spring. impact versus a leverage current here. IDFA will revenue John products us $XX forecast that adoption very have our the in the our but mentioned models look our release, we year, including that a help we impact estimate the rollout by experience earnings perfect and in opt-out assuming science, this contextual and We levels estimate with is We iOS country-by-country this our the Android. And of for data,

So our we feel pretty here. confident estimates in

John Riccitiello

When important analytical because of is a we're forecast, do investors. question little in a add know to like Unity. this the mind many I really a at we perspective I'd very

know. of basis it's side science, those And are seats, of a For the by-team our model on how not We'll an each In estimate lot product, at We that team we really even rate case, it's for, when highlights, have services to close. that this wanted might and in comes forecast job on across when just basis. you on give at level, our you create use a look build that business. revenue the not an did each a using data. the to example, detailed understand publisher. formulate help that monetization a teams entirely be many trying at because we're say, couple that up the way. but the for very many we'll better customer I uptake on It's us might how individual more people to look person individual We're of users just features a it Unity, we let to classification or what can aggregated classification team,

portion We about handle only to in on with have XX% of opted a ad significant from tracking. for already iOS. is Point out are have the this. start of beginning a model these, the impressions In many limited our of

take and game it our detail take extreme are opt-outs or new build user we with information, like application, with data by when that. experience step up step. So we people flows for a We presented other on

understanding. good a have We

share can't we going from drive are offset be, been advertisers strong data market confident That's spend if last market advertising get quite we're installs. incremental nuance that going we for growing our every what will understand possibility. business precisely know a basis many respond don't we can nor feel of on that's on advertising Now growth We with to insights. share our the years to with this, but

detailed think So net-net, place, it's going. and not we model guessing. but got in a We've where we're we very an understand estimate, we're

Richard Davis

Thanks. Great.

but he to the is COVID, So had half gets first, Bhavan asked the year all and shout-out. thing is this the the about that so with about this, question ask us second of deal analysts Suri

is did how So your on particularly on are COVID then results? a the your Kim, of, you environment recedes? COVID normalized is, impact XXXX broadly, from of And what more how is about you importantly, as gaming? overall COVID kind the business, impact see question And beyond thinking more impact the gaming

Kimberly Jabal

Sure.

out net So see million reinvestment. our to savings after COVID, of earnings $XX $XX revenue an less in as upside impact XXXX you alongside we million of because We called in some related in COVID. net release, to of saw expense a

trifecta We momentum coming the year On verticals. of gamers market that entering a gained share the had a we're a had In gamers existing We gaming, engagement. new often. lapsed gaming entering more the and back, with new lots experienced in side, lot of we user market. we gamers playing both revenue and across had

had billion players And XXXX John users. XX% year-over-year. and creator saw you result, in as that's release, consumed of a up QX, new higher content so in operated of XX% X.X in existing our gained Unity as our users rate month purchase in-app per mentioned, interestingly, active who as an we And reached versus monthly average with a

is is because is this interactive. the a which is and music seen in more we've what these new and is user Historically, And in are as So view that users the our starts normal. for into this XXXX, world even to valuable this that hopefully is now ecosystem. engagement we gaming game faster larger returning continue film much believe will And than momentum industries are growing the industry, combined. coming the so

is the You frame the seen. increasing And of network-based other with levels with friends. character. connectivity, control now The engaging next with nobody's something your players, also ever you're

In is a up from a QX, over see a XX% XXXX. us have great working heading XXXX with started ago heading companies in our environment, year filed we revenue ended driving new lot year, gaming. quarters were strong for adjusted In $XXX,XXX COVID a our into and X% gaming. revenue in customers just verticals, XXXX So XXX of our this of really outside we to those out couple of when of but we S-X. as momentum of slowly momentum into in And

flowed uptick marketing thing event we And planning headcount to generally, those XXXX. dynamic it are marketing. teams, continued that reductions growth interesting say the on the spend, start dates COVID the will though, side and of expense drive and sales bit in XXXX, the revenue last that an for and some made is The into and for travel, from The in QX would more of our assuming initiatives hires our I'll end back-end-loaded reinvest with R&D of many into thing savings hiring year. across we're other some a facilities and by note, I over

X/X hiring. So were QX growth our we quarter. projected accepted have that a for to Over headcount on offers our tied is year for of the stronger-than-usual start last

start, in margin. drop running our strong in really is QX a guidance operating and have this sequential for a reflected we So

Richard Davis

Great.

Okay.

Let's business move of on to highlights. kind

So let's start verticals. kind for with of create

virtual talk there showrooms set site about first you from brands kind of and can the Mario Forma Lu beyond into opportunity The question at Volkswagen? product e-commerce what the beyond and maybe is Barclays, for Unity's that is auto and he asked,

John Riccitiello

Sure.

the that menus towards -- it's it. of of year. So creator we an not may got who close pulled developer, for working tool. they're those end Forma creation. what pull-down and just know, to Unity, me don't enormously a is menus in the use. it for It's created hundreds And you is straightforward you describe it within to Unity those And last of that When be a for allow to There's editor. down launched let as content works professional powerful do these be

For they We create it is they familiar with all use, real-time not buttons. we XD roll content learn. to a it user more need so applications bring to someone can X a to that that's so get to power easy platform. Easy that a up -- easy in year can the take with these up development, or customers X out, new chore, or get anything run-time can to

call. The that We've with good launched, seen tool, really Reflect. first and that the we this about last we was of it and talked tools the like using construction were traction architecture on

content, of up showrooms They're really in they what democratizes for users Forma product create We can engaging Unity Here, nowhere and what does, And interactive Forma. that be. a to consumer they're and the state near extensively doing. e-commerce it talked real-time brands we're XD video. talking enables marketing We've deliver or configurators. including want to what art few was the into JPEGs environments. conceived this virtual and for Volkswagen about manufacturing point, most challenges with a about business associated Unity customers the And Forma

good up platform. already on a get Our really leading a include is and Unity manufacturer, luxury to and verticals, this got it company in customers way aeronautics the hospitality first We've people chain. really on a a going

our Newell advantage tools Productions, Nick Liberte Forma, SHOWstudio, added Brands, to like of and verticals are of there'll lot last Walgreens, in Just folks A on Knight. months, platform we've to coming be Reflect, the more. take like

Richard Davis

Great.

Okay.

In markets, for How It's Bracelin following channel this go create companies. it's good first manufacturing? question. a innovative I Sandler some target and verticals. are sense like to your professional asked on kind it we go-to-market it said, better one. is, Piper partners to most in at he -- really makes markets, the So verticals of or Brent services other you And the that means alone. can staying start of kind So through to question. work the sector. companies which and it's we other of top, about the the response strategy in Look, thinking off, try take

shift land beacons vertical. And is and model customers so from when in a expand kind what of of reference become particular we they kind to a

And customer their is depends model. on the of embedding go-to-market XD terms where so kind motion our real-time in of business into

own So that really professional with work kind means channel kind of partners. and X components: direct services sales, VARs engage in-house our of or

work up and on example, Autodesk's With Esri, in-car are technology platform. Department sometimes, on of sell with With standing help direct for strategy Elektrobit, kind geospatial joint AEC with So a the go-to-market providing But we Defense. front, we systems. XD Continental focused them, a to the our project. is Reflect entertainment need customers alongside of

have resellers or we Foods, providers. as delivery a of network specialists we which value-added growing that in or bring internal we managed Finger tap our in So in-house our case, either like group,

fifth So question, the to go let's John. back to

you a of of about couple recent the had Peter hiring Moore. questions us So sent

and talk of So new that maybe, John, that could we've any other late. made you about announcements hire

John Riccitiello

Sure.

this So opportunity. we think a see massively investing signaled once-in-a-generation that we've opportunity, we're at of many in to opportunity us Unity significant. And front and company. the realize once-in-a-generation times We we're is it's

this our to team today. on S-X really part, and small we what I'm that the the for and to start Now The are ago saw team founders company from team and most take brought proud is, I the Unity. amazing X X the you at a of the IPO years team in of the

make to realize capability the the and Now part my to all opportunity that sure has capacity team leadership of is us. front the in of job

to so time, that's a And job at or from here football championships. time my bit soccer to I'm Unity. changes coach, like a make part And I of win

talk don't and industry, live is entertainment. Now with know, the calls. significant of storied a of have probably about have Peter and sports in in Peter to he'll Moore, you things announcements well some we in make specific future today. arena to We the see Many opportunity

brings worth to tech the a Amazon grow years now. we've in everything our lot realized will will Marc also it's the Founder weeks, entertainment. add in is think we very there I of hired is couple Whitten that and to to also large He organization externally, a from Xbox lead beginning, an Create our the to incredible essentially leads that Unity, of Live. Live, announced both ability today, and and months not in his Amazon business. and He world that Solutions come He's GM internally Xbox from but to Marc noting, grow the large a come. faster that leader in a of leadership team

instance, that realize on to in we're this met there do map always trying the is to So with to is it. something at Unity, but is going sure ability the what make opportunity

Richard Davis

Okay.

let's So one. take to you gaming. this John, create on move for can

XXXX Merrill Gee asked, was studio faced the filled PROJEKT So from that's CD far was high-profile a is of but launch unfortunately at Ryan America bugs, Cyberpunk issue. only this Bank Lynch that with

So not but bespoke everyone a to just to about or this you of pretty whether be wake-up what build not game extent in kind do the for will much engines? AAA, industry also think call,

John Riccitiello

is my life So days. day-to-day this these

build their new investment at allure as engines, in get the game on of creating to But of It's times, the at DOTS organization for reached great involved gaming way well-polished, technology. gets a background, think and if we've it's a the in number we a Frostbite people I of game return to at the the bug-free. really engines that get Arts. created and Just And I've time going a leading most probably completely Electronic is and what it that of expensive. And consumers that you're leading to technology creation been create including teams XXXX been back want, which I platforms. to It's well-finished content, negative company. own point challenging the the

So options gives gameplay to create edge, full operated delivery and a suite and our visuals the hosting content developers of that monetization, endpoint built any at services. need it we've and a auto all game they tools Unity, realistic works: through on

As platforms in our and, market years all quarters. you've rising share recent dramatically across this, has again, recent watched been

of power I realize think are more developers and publishers the to coming Unity.

think will I continue. that

lot see of a there's few time, I engines. a think we'll them. I for over of think love shelf-built And

Richard Davis

Great.

to one John. for another note going you, So here

So update so Could estimates, your Tom create Roderick side, what's penetrating add-on count here terms in of set? the replacement But And for market, this market, at on progress Stifel Is the double on you're by programmers. seat you least asks, that gaming us art of sale, buying sale? our at making makes on is engine? a this who game approximately the artist, addressable with broadly more competitive decision? the

John Riccitiello

So pretty new chains, And way. for we're closing on deliberate artists. seats a come the the part, most platform to on it's in when they

been workflows. thing in the we've first better So investing is

too hard from engine, I've intuitive By would Can use me? more is years So game lot to us for artifacts, able into great these directly. for as workflows, into have the integrate made an Unity Can Unity words, when and build or [indiscernible]. now artists the [indiscernible]. their by, the progress, engine. a are any In hard go animation much. a you we've enhancing amazing for of And mean things?" the you game? of the this it it import the to I use to What them, simplicity was other is Unity Can you lot other the programmer artist intuitive help is game editor "Hey, Unity created say, not by gone but

editor. Graph, is offering second of the complexity enables the developer, directly like some specific we The of Unity tools create more the systems. without our in VFX a artist do are the environmental nuanced tools create of thing Graph, we developer, Shader to that the invoking parts These

is You can removed. the complexity the editor, work directly but with

complexity. of what here, that sit more like is we're they with help us. and on them can last among thing get doing, feel to tools Unity, So really doing tools these, The giving they're on hard is we're chatting we're working top powerful an ArtEngine specialized less with artist enormously

inside asset of to the that the application be they scratch Now part they that ArtEngine and other so is creating allowing be the without they're transform able find, game store inside or easily to tools them can it's through the use assets can to from this. on also them those services, game, used directly building. But to about employ directly

assault is a, core bring engine. them advance productive. One productive and of we able editor productive if artists, starting helping particularly without is more to make simpler, So X-front much it from you things to be so they're be is to directly developers, a the the to have not And on feel in tools much Other the will, more do them, complexity scratch. assets a to way. workflows, third

So the if it [indiscernible]. notion, were on they're metaphor, of create a why third that's a and And growth base. starting that's we're baseball in lot seeing

Richard Davis

Well, let's gaming. right. over to for Great. operate, to just operate Thanks. All pivot

Andrew asked, gives is have John, differentiated the of strengths Unity insights of behavior. lot into you that one Oppenheimer you of gamer data at that So a all Uerkwitz

single presence You and of the tail have a long strong A in AA developers.

of market with back-end services your how is you monetization the evolution is, see AAA and question from do the So studios?

John Riccitiello

So there's two things.

back good for no if true. studios creation. AAA wasn't off, longer to X content go Unity That's and X First really for a years, choice use you

AA before And now so and launch titles. in And and date, AAA. market that, on that's one Sony share launch of much so we've growth Xbox the PlayStation well seen support reasons we and

with one of that So engineers in-mobile And a justified team. as on very first, bring they always own really I that take better. Unity can that place them What they're and they ERP capability AAA everything lot AAA. is there's increasing X creation; gives systems and have base understand, a we things from them build very the scratch. from we basics to on the and to They content mentality advantages. seen to flexibility to content as in because work in imagine can is comes it and things: their do put of And engineering-centric, I've had start then engineers. well do with build AA well, Unity, it the make developers on again, But third just you it scratch. the just of

an data might they're On million some on MAUs million of significant XXX have example, XX customers XX million our or million scale. the as at side, XX even or monetization if or

As very you heard, The sizable we're is billion. X.X advantage important. data at very and

into to we what don't side So tools to need, on in them, increasingly, they And have we so scale, they the they service bring data create the they the side, from time bring scratch. Every that Unity. use infrastructure both and side, can worth and Legends Unity, It's as most successful on Apex leverage. others, Unity's had important fell products that scaling over. online launched games and mode some moved back-end. with the noting, launches The can they they were they postlaunch, smooth of

to a path create. on mobile has it's AA great So question. been to really AAA And our

what's behind successful into more getting in create and operate is the up we're right way. fast. a AAA echo, And just we're it, usually on Now coming

Richard Davis

Great.

we we're a concept? is the that this, Growth announced So the talk for And question of the Program on in so, Crédit Program. announced Yao first our one. late Brad Chew Zelnick what often operate indie take you And proposition Growth you have year. the team from last days your kind And this I'll question value the created is Program. the Can Game is this It's Game Growth Game very Suisse. recently at origin the about and unnoticed, of -- a even very look, about developers? the indie that But excited off, operate go especially idea program. games great view, segment. for that from sprang, So early this

creators, always and So money. have know, side build between would been their just creators tactical and to of to fair and vision as make it execution didn't has Unity on audiences the that you seem choose entertainment

Game our bear of So to over seen many of literally thousands data the accumulation of way from practices petabytes the and of millions a bring of through applications the years run kind best of tests Growth think succeed to of as by that course hundreds we've tools. of

a win-win is revenue customers for games, this front model. with Growth on on the Game an think a lets Program we building we the group succeed and great our enhanced because focus select them of monetization help So them share model

go to for question, verticals the So let's tenth for John. this and operate is

the has So Piper describe Brent Multiplay Bracelin to system? applicability opportunities It within nongaming the gaming. would operate you outside of that at verticals seems monetize asked, how

So assumption? first And this more part would about correct a your level, a for that at off, the drivers broadly, you high is business? how think of

John Riccitiello

it's we've site, example, the to off, most Starting point, If I If industries, operate take by -- applications your real-time it's a And a XD, where what area not website, We see supporting it. to only real-time applications Reflect. the site for. lot an support. say you're a see going real-time going And needs check but we is content that's for of an support for can excited XD. again, both XD, increasingly where if construction, And gaming. lowered about we've real-time the are though, host no of the application and which So the we've with come the it's like e-commerce, just And focus bar in. you're service we things dining to first increasingly I'm Unity, opportunities for in need Multiplay, and that static. that outside truly now. a they're a opportunity starting see those streaming content presently own whatever cases, it nongaming with is it back-end hardware, using, creating it's table, If would needs you literally not with And real-time needs many, it of view you're they're configurator architecture want real-time century. done and is today, or needs get products longer becoming app our Once involved delivering If Forma data, might kinds we're with streaming, Reflect to many content are of process in you XD wood XD Furioos the the customizing on to into to got but out simplified on updates XXst or we of there. it's that's also these Furioos. It new that's basis, Forma. application a a box. way is

an to it we like You because operate bring team in don't need gaming. outside of that It's the that make circumstances really good of and feel many opportunity to more work. about engineering

Richard Davis

Great.

So let's of R&D pivot and John. technology, of core kind to over kind

is part you've made talk a XXXX, at what past, DOTS? asked, projects big the headed, to Suri where in Bhavan in NetCode talked about -- progress about a So your strategy as such Could competitive and you in on innovation. the of William some regard you're Blair focus that particularly R&D-led you

John Riccitiello

example, Unity, So NetCode they address important and at them me is DOTS, a take for different separately. but and let innovations form, super

multiple everything's RPG in game, this of that NetCode, the same that the game, bring developer networking FPS, code a same synchronized they're is the so playing It's game. and So and needs effectively. the code brings an that the people sports environment to same players the from instance into a

architect head or is Now first-person different actually an than what people what for engineer at a probably don't office. is an many is important what might realize support shooter game

be noticed an or market. year. milliseconds of With noticed. We'll application you already XX And or a product be it need application game. our textures NetCode. how manages about The art, sort enough? and this year also it adding of an you're of makes virtually that a FPS. bandwidth. lot the put that our different You worry Reflect, those specific And all an It's different point some wouldn't onto that. NetCode latency one puzzle RPG those RPG situations milliseconds an don't. screen we've NetCode types it on to where every -- about XX new be is -- is supporting. this it game you all we What like I'm notice And from that And of making in a is net is depending executions of XXXX scratch. the wouldn't of game issue in it the bandwidth get Can really But beautiful you in it's beautiful fast at complex. is

And go enable the into successful difficult for of is very that's our cheating will product will to and what's more. enable that going around thing away. multiplayer built And issues so and a make will scale to them developers other to and It thing them with to we're that games. lag this be it because get do,

it continuous We proposition it directly editor. to making Multiplay, connect literally to the It's also developers inside one for very Unity our operate easy list. service use

creating years a the is of some environment, is organized. games Now the is about AAA you let is physics, DOTS talking be what technologies script Every of thinking the a I stack. code you every character a thing. what about of or our animation, all clear larger me set data. work for of car the about very all developer couple that or or behind we're technology think how of hundreds that is that mean if that And by of DOTS every supports content. you a And It's art configurator, people as different all behind if at content. fundamentally content look data-oriented data sometimes handful different has them, the a

an lot high mess. content be core go bound by a there. GPU. of And programming, it's individual with that to for through out object-oriented there's And and can individual So an an of honest performance, traditionally, content you, how much a it's

interactive environments and out of content, more we of our everything real-time the the objects, thin in having slices see can into getting it's lot sort of And our object-oriented of so DOTS have intent offload something can of of system, slicing you to so XD data, that XXXx all X performance for over that can to XX bleed And a you easy-to-use lots lots DOTS by get objects. performance core the course it. to to of technology, versions continue to a to X years next without for where rich of work

most it's it's the the a set. to of to future in work horsepower think I addition Unity way will years games come, certainly technology and the massive

Richard Davis

Right.

question Uerkwitz M&A at Oppenheimer. an got from we Andrew So

And think at go-to-market means a also acquired valuation talk M&A you map? expectations. have bit road you of in tuck-in war a as you your Could have as to strategies just So in we of a made cash past, at level chest, RestAR sellers also, about the today, but high high how know, and a accelerate acquisitions. you have series technology least but mid-December, you

John Riccitiello

Yes, sure.

million from spent starting going back beginning, $XXX M&A. we the a point, So as in approximately

on So investment mostly companies been acquihire build-versus-buy mostly an in platform, we the orientation. gigantic capability acquiring get tuck-in our been and a a been that it's We've want not end. orientation to think it's we under

bad a M&A I'm most a is idea. of war a believer Now chest, this that idea

got And to on for high so hurdles criteria, all execution, It's tactical culture. got match. we've clearing criteria, strategic really

to to But for front is say. done when So It's so I in wouldn't the in of of get and I effectively. good Obviously, more we're don't so advantage well. we price, we to the notion can't we've market. get something oriented. take cheaper really go far way But organically out. specific Board put going think the something we the to we've the our far. look primarily what M&A, that us worked anything I all that bigger keep or it. done hurdles another where have on to of we us do our almost rule worked want reviews feel M&A can But as more at really things on I about that.

Richard Davis

at my Suisse. Chew of we've got And the is I question best Zelnick Crédit stuff. don't all Great. from this know, sending through This Yao Brad and is in guys -- us -- all opinion, written you

read not And so because I word had good to it's to. word too for this

says bring you're the which COVID who in will, what this forefront, different. moves And XR landscape? thoughts disappointment camp that latest to to says idiots. but watching? it like John, analyst, What not on your XR. bear sure the I Being here the former key a relates pretty you're today? I what bull are or didn't the platforms like camp, line. analysts are gap more, between So if the comments and quotable are which the that Anyways are different nothing of time What's -- your as I'm is

John Riccitiello

point. my first really the a CES awards on, projecting in coming devices an me and a next and these adoption. I'm lot hours was at I it easy up need my And at is reason of the platforms year disappointment were to is, in remember day, What with it And that. to head. of was meet that's The consumer back So second going hours explaining years. a it much years. the around what was the time. of in be was thing winning I as initial I presentations take would show. Oculus felt of do. analysts out this kind of the after then on that product year that VCR it's of needs of number pretty not criteria. with to market, products early to and familiar that's starting successful XR can needs the explaining as programming like gap sometimes staggering If it's a The It I thing the this X I or challenging this hardware it space, get set a a cable At going back And at slower were yield other the the I to not trying number I'm wasn't the simple. that work and mass [indiscernible] taking to And to And was running time, to disappointment. back Unity the gap the in growth, was growth off the going happen. expected to go

felt play it So more buy software wanting It's I a what in you people works. can do than Probably it. level. have to with need hardware anything, don't consumer for to can hardware that that buy price remember got you They that was people at that hardware. for The that it.

ecosystem to economics and work, the And for be that a have a to onto that So rich also need you developer people to there content. bring of vibrant needs platform.

are where and criteria. together. combination yet there a I seen haven't other handful, those brought are all And the So it's

made confident. Now or be They've over hundreds an $XXX has $X develop Quest really cut Facebook million It's good to And $X needs XX of But that than happen, highly for multiple generated X. million beautiful, going millions. it. people content device. impressive that's really be progress It more I'm that million will announced to to revenue. titles with doesn't

arena. it presentation the this minute. and one innovations number that going pocket I massive to operating sure low-penetration going I'm confident I've my that devices ecosystem an The this. by am us about to that think got did, music I can for players That publishers my the which am products that to this come a the getting years to that all is that was of well seen. manufacturers, gap make the in I product. for I MPX Apple that the it just in were that, big going spectacular experience owned together. no sight I'd gave going think And were you early make I if they're a Now I disappointment highly to of didn't growth the I come the many when player, together, around say and point simply right it's XR before platform, all what that get real going ignited larger was And it see in that Steve iPhone. with -- X me when I pocket we are was give someday. highly that produced wasn't of was the confident someday, making that make see, with of ago remember, the pretty music same right. see it is Jobs if is from to on to to to what that start the to endpoint Apple wasn't

in off for all the XR you investors it to the early thank ground. get So

You made the possible. industry

for it's tomorrow that opportunity in we're now the to about it. But to think scale. going find years I more I still good feel come. there's

Richard Davis

Great. Thanks.

So we'll finance a finish up with questions. couple

Roderick should Tom some between sales focusing at marketing asked, more Kim. investments Stifel can for gaming we versus and start you on and let's which think broadly, your you're revenue first, provide verticals? areas So leverage growth? how And about operating around detail

Kimberly Jabal

Sure.

gaming So see verticals. thanks huge and in We new the question. for in opportunities both

investments marketing if sales both and on both. other aggressively in we are in growing look the create operate. definitely in majority gaming, investment still the create Currently, And we're our especially across you so actively of and But are verticals, particularly our investing side.

John did opportunities create with in start for about then to the operate. some talked operate. within expand we verticals of we'll As gaming, and other

So enables us the right optimize and out marketing that sales products channels push right model the to we multichannel a built to go-to-market through effectiveness.

We have in a to sales direct sales. inside addition team

lower team. have We sales cost a development

We have indirect reseller channels.

gen. we have demand stores. have And partnerships We that our strategic enable online

approach. So grow verticals both with in and this gaming we're moving quickly to

leverage, very should gross as growth, margins increasing to our both revenue growth operating focused out I we important in revenue terms our In as of can expectations, well point And initiatives leverage. operating that is if profitability, understand than achieve we will thing upside to one free XXXX. goals revenue-driving cash future exceed we're maintaining so that's that which path invest on meeting our hope we we flow rather of a on a into basis way, revenue in accelerating our to the end by reinvest, the disciplined and

Richard Davis

Great. Thanks.

question. tactical of kind last of kind the take I'll So

ago, first hey, think by this the under we So accounts guidance. of about our XX% numbers. How and XXXX? of embedded Franco year by a Granda that plan terms yes, Pro/Plus hike should users in increases in pricing the you of upside prices reception our large you rolled prices the What so for increased of year? now in through January. raised So the price factors as And at about those the are percentage asked, D.A. pricing Davidson tiers increased last over the majority pointed fall been out, has we on just

And that technology. way at do increase. Now is know, pushback says view And little lot our that our sign on a you it lower got cost developers for you value from context, just very price and a see our so customers of the functionality delivering better that's to because market further, earn we good your stepping more by you leadership, ownership. that back even, of in our

getting on goal right prices. than would from is our raising So to of kind of now that we sort factors focus rather get some pop short-term those

Q&A. open up So it going to now to open we're

at first Crédit open think be can So do this. Chew the up we this, Suisse. Yao Let right? me person I And will

you think -- I yes, there you are.

there. can a question You ask

Yao Chew

worse were COVID year. on Kim. to Congrats here double-click key ago? this great break question the a new in Really My you approaching parts. the lot wanted for either or announcements out better, that days space. the the from players $XX $XX consistent, a IDFA been million thanks close is thinking or to In and has way Number on number of this There's A changed. in XX million, with one, John is helping impacts. particular, about situation lot X

the Just you a bit trying that. X-year to the little understand the into And XXXX by Is cadence how thinking at shape of this this lag this are goes away the on impact point? the is, about that? question the it when end a should to and approach most recovery more second of issue and year? of the Or

Kimberly Jabal

want you and can jump do to in? start, John, you me

John Riccitiello

Sure.

Kimberly Jabal

Yes.

potentially changed XX in in lot in wouldn't it around last of general, don't a has I But So delayed. a think impact. was terms our impact then QX, the lot and in has days. for I planning were changed We some say the thinking

that come. risk We -- this have moment that and could with this dealt We've preparing this We for years. a been risk working this. for this on this was knew that GDPR. been We've honestly with

So days. that in I the have last XX say changed wouldn't materially things

the but introduce certainly very forecast to predict able to we earlier, we does we As to business. we're our business. mentioned feel confident our impact confident that feel our This in ability uncertainty, some

will impact in will of we the the I John, But year, a feel that and to certainly do the the time, be that's we for million. share. an gain there there's believe, opportunity $XX we've real over market articulated us let why be as that would just the there terms curve, I'll Initially, advertisers to short-term a maybe impact. changes, shape take adjust that you In say one. of

John Riccitiello

Yes.

be consumers COVID the right? Just and Deep is a a little -- big impact, on and And color. that to to China. a can pretty we're or deal. accelerated we pretty months home to XXXX, People X We'll present. IDFA wants slowing some on another that is way course, of much. into But analysis going with the it engagement. in I validate declines would be likely any deal, came XXXX don't future. impacted the And us so, we're obviously, or least it big -- COVID's X which think that XXXX be. I we say not have tells us at unusual -- probably growth by for see of

China read. early So gives really a us good

of We IDFA, its very So forward. made that. and On lot disruptive in to world, in really there's it's bit is crash, force that's certainly a share it's better X that anything gaining of a we're Within And for of product we growing. terms and It's anywhere. better been around as -- feel from I going growing particularly is as not -- in important market have perspective, there overall X quantified about X industry see game is share a the -- and The our growth. don't market that, this tell, shift on our one way service. a engagement with robust. confident you major based that. impact. think see the is, there industry of that factors. within the and And don't as we've in of it's of it, part X revenue user a IDFA, growth can stream going to One acquisition-driven and us

right in we doing things. feel we're the that So confident the right place pretty

Richard Davis

next. up you're Stifel, at Roderick Tom

Thomas Roderick

was us and words, could benefits some out metric year with Great during square for the you you net but benefits the were and some us without fantastic play congratulations, hoping a a So help XXX% a sort you about I year. year, year, in table set guide set give think, onetime everybody. Kim, maybe number? for of from might In other the in level not saw kind I you COVID us this that work necessarily through finish. of the dollar you for I perhaps year. of to, what that how normalized know the retention it's was to could lot a thinking number positive noted, the of that

Kimberly Jabal

sure. Yes,

us. very NER for metric has strong a overall, been So

over saw X we the in last talked if that QX, higher you as in the place is at the end orders drove trends, about. engagement years. shelter NER this healthy for sequential well been it's look QX in seen, you've that What As we XXX% year, a saw and user we pretty jump

business, metric a And within bit in what our particular, see and so QX in QX. that then it is Solutions And really Operate QX. down in coming it drove you

do We 'XX to a had typical a with more seasonal benefited within from of tough enhancements that and of over number compare had we which QX lift. Some in algorithm Operate Solutions. a product

year. what's then IDFA And question, that XXXX metric moderate, we had that's those to thinking the in going particularly do XXXX. impact given next trend that your we throughout tailwinds expect that So about on and in to some the year, of answer of within

and see operate. continue believe all we create to we expect volatility, So of within growth us it be really will metric moderation, have metric strong we customers that but for very both a some as just our across to the

Richard Davis

D.A. Davidson. at Granda Franco

Franco Granda

I if ones, John quick for very two one had may. One I Kim. and for

for which you side we and trends really. first launch being as potentially been user impact right? lot the of The mobile two engagement COVID, about questions one, one John, big engagement, about 'XX, user could of new things: of entered in in the two, There's obviously a detail; There's then talked particularly consoles. the that

then that, margins what advertising are in your seen you break those? small question benefit a as total on perhaps are of platform second And of one people acting out result one? haven't gotten of And as launches? Or you if across supply lot then your engagement the since really my is slowdown their on the really today hands revenues? a new for percentage the do the what console latter. Kim. So a a associated the you Can issues Have with revenues are

John Riccitiello

So the question answer is to that no. first lengthy somewhat

some color You might on want that.

consoles engagement together When might about XXX month, you million the some -- given you In mobile because adding any So way players. starting And me that. monthly all players the just mobile. it's on in of aggregate, most point. think to let have just a we world's are do give mostly

per obviously of video's engaged and money. players, spend lot spend of very My upcoming them they they're title. a for $XX $XX A off. lot titles, Now

mobile. over those so most users, are them But is very And X.X of important engagement billion customers.

portion mobile able new happen. think of and on losing for that So prior PC to launches effect. now typically of tiny is looking to the to now shifted and typically, those relatively while of games important, users to the say a is expect themselves no, the in But the they if reinvigoration managed happening a that base. of definitely new to hardware. market the the Xbox in end What about sort I for from any And products a expect been a user engagement. and reduction share there's little an that console, What those I console dramatic console has get net haven't a console kickup to and console generation is things, I to get were would year, launch, the happen, talking is the happens of PlayStation, that in look has hands of is X% consoles hardware. devices. new around those, scheme new more then upgrade get that was at the of new I new the in for a new something ways. we fully There's of them you market I'm big forward of we're But playing the hardware, consoles. and the seen this quite an And and that total to already of always engagement the numbers at and manage X% last

Kimberly Jabal

Yes.

by In our revenue terms break out of advertising don't revenue, the product. so we

business, of services because create Operate the and within business mix largest primarily of was building a that both -- can products I now. several operate. for it been years We've and Solutions have services it We say that the piece our is and first. product

newer. And the services operate and just other products some of relatively are within

but -- out. of So it it is business, we're larger so portion certainly not breaking a that

company, look question look products at our not we're that all around don't out, our disclosing. And also product-by-product subscription the breaking we business products We at then total as profiles. really product across look but look that margin gross the of And are services, can something two a actually, I of line. On do margin. and monetization margin say the we we're We at margins, our that's margins by our service. when and highest company not

John Riccitiello

in people increased And gaming. I more want hardware. new correlates most mobile phones buying to nuance higher-end install to last add on applications the around point. People engagement engagement definitely one

all You've done it.

a you get new numbers phone, orders that magnitude Apple bunch stuff. are in of launches The Samsung are are user on terms install of You households. a bigger new of new console phones new the and numbers than the

is world don't what the So forget in that witnessed of of the we've mobile. just console. in world not also It's just

Richard Davis

used Piper be now at Sandler. Sandler, Piper to Bracelin Piper Jaffray, but Brent

Brent Bracelin

momentum my I to wanted year-over-year triple-digit It's bit seeing ago, to into you by create the team That of XX%. the mean, Good of what, puts more. that here. had was, I drill a X% math, now really kind a And the I close there. on basis, saw question segment X one down around mix. it's little beyond it, gaming months growth. and this

a So just configurations auto inflection accelerating off? now? this, momentum why what growth one point gaming. the Is this bump Is looks taking of beyond Walk around me what Reflect of product like, in Forma, quarter? beyond for gaming, sharp kind this through drivers are XD

John Riccitiello

initiation let So some with start points. me

we saying that how typically weekends on because we make we for leads of there always it is what they to them the quite living. to how So at to them nongaming often a of curiosity because scaling Unity. professional then use is they or happen engage support happens whatever. can't hello by technologist get the figure games start around use project. that do after some start around What they seats. them scale There's out They That already verticals in meaningful services few with some a what telling in messing application And to level start in of and underway. knew sort

while just X develop. I about In it Now private. was a take idea, sort of to otherwise, a years about model. what while way, our think warning That process. want takes way. you it when But of we the ago were a talked this to We is great if we about the was disappointment to gap that get through

control million are Reflect XXX you're run-time not front this giant airplane and this meaning Forma with and system, applications, X levers in buttons engaging you. of

get can X, will with You're that buying that And reduce applications forward be the seat is, dealing have the it boat up apps again. configurators, pair come the knows build we what seats run-time car get the that because -- to it. talk initiating them behind started a on big configurators can for over real-time of we And the of is auto same helping what over on for Forma with custom and true way chunk a Levi's, with need configurators, you a manufacturing path verticals developers. real-time point we or over application of with X, us dramatically and more X faster might tractor buttons, course, then leads and think to can days. And A fully and thing God sometimes, was configurators. expect And because benefit I going people provide only you about we services developer that our these basis XD. And a of real-time configure, platform. to complexity to work now. of that's will plane -- realized some time. conversations example, By I of getting about the turn and, you we into the

outside what's Simplify enabled of long-term, that gaming. of comfortable it's verticals more very speed in that take me really, the growth the that it, out believing had we So made bumps lot it? insight rapid a way. And

Richard Davis

Mario Barclays. at least, not but Lu Last

Mario Lu

I'll ask guidance. ones guess boring So on the I

around high versus, assume Operate I sequentially growing sequential segment segment So growth Create was terms it in growth to a mid- single-digit the the of XQ we guide, XX%. the if believe for in historically, implies that XQ, for

call to $X factors sequential assuming we're if IDFA million So versus historical? a of out only to this XQ, growth there like other kind $X any regarding hit million are in lower from

John Riccitiello

give come with of really you more. can in kind and level maybe high a I'll Kim

saw transition. the create we operate an specific level, create expect giving grow our than after -- business we high actually numbers, of XXXX. not we're on And faster So acceleration while COVID to we're in

seeing around a function robust all and we're a in growth saw slowdown gaming the things operate. in the we that new for announcing. of specifically the that pipeline been year, in products we've Obviously, road is the now IDFA middle the really So like that's and and fact verticals a on of bump in, to

to those operate the tip favor XXXX in create an story. of enough was balance So where are

Kimberly Jabal

I add. I don't anything have to it. think that's

Mario Lu

Okay. Great.

more the full So year guidance. on just one

-- income this is negative operating negative the margin year, X%. So midpoint guide of the XX% a at versus

I that headcount what mentioned evenly think, marketing, distributed on in between the Is are How for should G&A? is the Kim, And development, that? year. we company? margins about sales particularly thoughts early product think OI you it and your long-term stronger updated

Kimberly Jabal

Yes.

have mentioned a So XXXX. we goal I for think earlier, do have profitability may I

all our path. We Keep operating that drove margins. are mind we in going on COVID year, to that of those keep had moving really that last savings

and so year, question, thought as drive profitability. always R&D. and foremost, we can, are fast much and first very your as we investing And to that this investing in And continuing we between carefully as answer balance around to

that. in marketing. And on continuing driving to we're Then and to leverage sales You'll continue see work come G&A.

find scale, leverage sales growth, efficiencies we're in young line on as more marketing. and investments we to out focused we've as continue now As a our drive we get company, and shifting of and been those and R&D to G&A

our year. the throughout investments terms strong maintaining So XXXX. and move continue yes, in we to focusing both first in and moderate coming in But the quarter, I gross first so that growth margins on said, profitability can and balancing mentioned the -- are we like quarter, headcount really I towards these we're is make will that the of that

Richard Davis

last it Well, than X:XX it. Great. shorter Time, done Eastern was minutes X I've All time. right. so

out. guys you help to tried So

and everyone, insight and questions for much we appreciate and your support. great really very you thank So all

we'll and And to Thank quarter. hopefully, the you talk quarter soon so so during again, you the next and much.

Kimberly Jabal

Thank you.

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