Reading Unity 2023 Q1 Shareholder Letter

Unity Q1 Shareholder Letter - May 10 2023.

Terms Notes

  1. pro-forma: To calculate financial results using certain projections or presumptions.
  2. EBITDA: Earnings Before Interests, Taxes, Depreciation & Amortization - use this metric carefully. Warren Buffet calls it meaningless and SEC requires listed companies reporting EBITDA figures to show how they were derived from net income, and it bars them from reporting EBITDA on a per-share basis.
  3. Adjusted EBITDA: EBITDA + Adjustments.
  4. GAAP: Generally Accepted Accounting Principles.
  5. Gross Profit: \(Revenue - COSG\).
  6. COSG: Cost of goods sold refers to the direct costs involved in producing a company’s goods. like direct materials, such as raw materials and inventory, direct labor, such as wages for production workers.
  7. Gross Margin: a profitability measure that looks at a company’s gross profit compared to its revenue or sales. A company’s gross margin is expressed as a percentage. Gross profit is determined by calculating gross sales. The higher the gross margin, the more capital a company retains, which it can then use to pay other costs or satisfy debt obligations.
  8. Operating Expense(OpEx): expense that a business incurs through its normal business operations, including rent, equipment, inventory costs, marketing, payroll, insurance, step costs, and funds allocated for research and development.

Some important formula:

\[NetProfit = GrossProfit - OpEx\] \[GrossMargin = \frac{Revenue - COSG}{Revenue}\]

Unity Q1 balance sheet:

Summary

  1. EBITA comes to $10M but net loss is still very high.
  2. Revenue continues to grow($500M), but quarterly growing speed slows down.

Revenue comes from two sections:

  1. Create Solutions: $187M(37.4%) - all-in-one gaming platform where clients have access to a diverse toolkit of resources to help envision, create and advertise their next big mobile, or independent, video game.
    • Unity Gaming Services： $170M.
    • Strategic Partnerships: impacted by the timing of large deals.
  2. Grow Solutions: $313M(62.6%) - provides analytics and other monetization tools via its Unity Ads service to ensure products designed on their platforms continue to thrive long after they’ve been published
· Finance