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Unity Software (U) Q1 Earnings Miss, Revenues Increase Y/Y

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Unity Software (U - Free Report) reported first-quarter 2023 loss of 67 cents per share, wider than the Zacks Consensus Estimate of a loss of 5 cents. The company had posted a loss of 60 cents per share in the year-ago quarter.

Revenues of $500.36 million beat the consensus mark by 4.8% and jumped 56.3% year over year.

The company’s dollar-based net expansion rate was 107% in the reported quarter, down from 135% witnessed in the year-ago quarter. Moreover, the number of customers who contributed more than $100,000 of revenues increased from 1,083 as of Mar 31, 2022, to 1,322 as of Mar 31, 2023.

Unity Software Inc. Price, Consensus and EPS Surprise

Unity Software Inc. Price, Consensus and EPS Surprise

Unity Software Inc. price-consensus-eps-surprise-chart | Unity Software Inc. Quote

Quarter Details

Revenues from Grow Solutions (62.6% of total revenues) surged 101% year over year to $313 million.

Create Solutions revenues (34% of total revenues) increased 17% year over year to $170 million.

Strategic Partnerships and Other revenues (3.4% of total revenues) decreased 9% year over year to $17 million.

Gross profit on a non-GAAP basis grew 61.5% year over year to $394 million in the reported quarter. However, gross margin expanded 300 basis points on a year-over-year basis to 79%.

Selling and marketing expenses flared up 82.9% year over year to $130.2 million. General and administrative expenses rose 11.7% year over year to $58.4 million. Research and development expenses surged 20.7% year over year to $172.9 million.

Unity Software reported non-GAAP operating profit of $32.5 million compared with the year-ago quarter’s loss of $22.8 million.

Balance Sheet and Cash Flows

As of Mar 31, 2023, cash & cash equivalents and restricted cash were $1.61 billion.

Cash flow from operations was negative $5.1 million in the reported quarter against net cash used in operating activities of $101.3 million in the year-ago quarter.

Guidance

Unity Software projects second-quarter 2023 revenues between $510 million and $520 million. The company estimates revenue growth in the range of 72-75% year over year.

Non-GAAP operating profit is estimated between $50 million and $60 million.

For 2023, U expects revenues between $2.08 billion and $2.2 billion. The company estimates revenue growth in the range of 50-58% year over year.

Non-GAAP operating profit is expected between $250 million and $300 million.

Zacks Rank & Stocks to Consider

Unity Software currently carries a Zacks Rank #3 (Hold).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Agilent Technologies (A - Free Report) , DigitalOcean (DOCN - Free Report) and AMETEK (AME - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Agilent Technologies have risen 10.3% in the past year. A’s long-term earnings growth rate is projected at 12%.

Shares of DigitalOcean have fallen 3.2% in the past year. DOCN’s long-term earnings growth rate is projected at 41.06%.

Shares of AMETEK have rallied 20.2% in the past year. AME’s long-term earnings growth rate is projected at 8.95%.


 


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