Unity Software (U) Posts Loss in Q1, Revenues Increase Y/Y

Unity Software U reported first-quarter 2022 loss of 8 cents per share, in line with the Zacks Consensus Estimate. The company had posted a loss of 10 cents per share in the year-ago quarter.

Revenues of $320.1 million lagged the consensus mark by 0.2% but jumped 36.4% year over year.

The company’s dollar-based net expansion rate was 135% in the reported quarter, down from 140% witnessed in the year-ago quarter. Moreover, the number of customers who contributed more than $100,000 of revenues increased from 837 as of Mar 31, 2021, to 1083 as of Mar 31, 2022.

Unity shares were down 29.36% in pre-market trading. The stock is down 66.3% year to date compared with the Zacks Computer & Technology sector’s decline of 25.9%.

Quarter Details

Revenues from Operate Solutions (57.5% of total revenues) increased 26% year over year to $184 million.

Unity Software Inc. Price, Consensus and EPS Surprise

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

Create Solutions revenues (36.4% of total revenues) surged 65% year over year to $116.4 million.

Strategic Partnerships and Other revenues (6.1% of total revenues) increased 11% year over year to $19.7 million.

Gross profit on a non-GAAP basis grew 32.7% year over year to $244 million in the reported quarter. However, gross margin contracted 210 basis points on a year-over-year basis to 76.2%

Selling and Marketing expenses flared up 31.9% year over year to $71.5 million. General and administrative expenses rose 21.6% year over year to $53.5 million. Research and Development expenses surged 30.1% year over year to $141.9 million.

Unity reported non-GAAP operating loss of $23 million compared with the year-ago quarter’s loss of $23.4 million.

Balance Sheet and Cash Flows

As of Mar 31, 2022, cash & cash equivalents and restricted cash were $1.2 billion.

Cash flow from operations was $101.3 million in the reported quarter against net cash used in operating activities of $88.9 million in the year-ago quarter.

Free cash flow was $86.4 million compared with free cash outflow of $100.6 million reported in the year-ago quarter.

Guidance

Unity projects second-quarter 2022 revenues between $290 million and $295 million. The company estimates revenue growth in the range of 6-8% year over year.

Non-GAAP operating loss is estimated between $62 million and $64 million.

For 2022, the company expects revenues between $1.35 billion and $1.43 billion. Unity estimates revenue growth in the range of 22-28% year over year.

Non-GAAP operating loss is expected between $60 million and $75 million.

Zacks Rank & Stocks to Consider

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

Better-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices ADI, Broadcom AVGO and Cisco Systems CSCO. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Analog Devices shares have outperformed the sector year-to-date, declining 11.7%.

ADI is set to report second-quarter fiscal 2022 results on May 18.

Broadcom’s shares have outperformed the sector year to date, declining 12.6%.

AVGO is set to report second-quarter fiscal 2022 results on June 2.

Cisco’ shares have outperformed sector year to date, declining 21.8%.

CSCO is set to report third-quarter fiscal 2022 results on May 18.

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