Unity's stock sheds nearly a fifth of its value as earnings, forecast underwhelm

By Emily Bary

'All of our focus turns to reigniting revenue growth,' company says

Unity Software Inc. shares tumbled in extended trading Monday after the app-monetization company whiffed with its latest results and forecasts.

The company is in the midst of a transition, recently embarking on a plan to cut costs as it looks to win back the trust of developers after a September plan for new fees angered its user community.

Unity (U) has "instituted a much leaner cost structure that provides us a healthy profile," Chief Executive James Whitehurst said on the earnings call Monday. "And then from there, we can scale in a profitable way." The company is also "in the process of improving our growth performance, specifically our user acquisition through better use of data and stronger models."

Management noted in its shareholder letter that "with the portfolio and cost structure reset mostly behind us, all of our focus turns to reigniting revenue growth."

But Unity's outlook and results still disappointed Wall Street in the interim.

The company forecast $415 million to $420 million in fiscal first-quarter revenue for what it calls its "strategic portfolio," deeming that its non-strategic portfolio will not be a meaningful contributor to revenue going forward. The FactSet consensus was for $534 million in revenue.

Unity also sees full-year revenue of $1.7 billion to $1.8 billion for the strategic portfolio. Analysts tracked by FactSet were looking for $2.3 billion.

Shares declined more than 19% in Monday's extended session.

The company's fiscal first-quarter forecast for adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) was $45 million to $50 million, while the full-year view calls for $400 million to $425 million. Analysts had been modeling $112 million for the quarter and $647 million for the year.

The company logged a fiscal fourth-quarter net loss of $254 million, or 66 cents a share, compared with a loss of $288 million, or 82 cents a share, in the year-before quarter. Analysts had been calling for a 46-cent loss per share.

Revenue came in at $609 million, whereas analysts tracked by FactSet were modeling $551 million. Unity noted that revenue would have been $510 million excluding a transaction that resulted in the release of Weta FX's deferred revenue.

"We know it's not easy to follow all these numbers," Chief Financial Officer Luis Visoso said on the earnings call.

-Emily Bary

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02-26-24 2153ET

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