Unity Software (U) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $449.3 million, down 16% year-over-year, with both Create and Grow Solutions declining due to portfolio changes.

• Net loss for Q2 2024 was $125.7 million, improving from $193 million in Q2 2023.

• Major restructuring included a 25% workforce reduction, office downsizing, and $201 million in separation costs.

• Leadership changes included a new CEO, interim CFO, and new hires in advertising and corporate development.

• Unity 6 is set for a fall release, aiming for improved stability and performance.

Financial highlights

• Q2 gross margin improved to 76% GAAP and 84% adjusted, up from 70% and 81% respectively in Q2 2023.

• Adjusted EBITDA for Q2 2024 was $113 million, a 29% year-over-year improvement and above guidance.

• Free cash flow for Q2 was $79.6 million, up from $33.5 million in Q2 2023; cash and equivalents ended at $1.3 billion.

• Repurchased $480 million of 2026 convertible notes for $415 million, resulting in a $61.4 million gain.

• Non-GAAP operating expenses fell 21% year-over-year, now 59% of revenue.

Outlook and guidance

• Full-year strategic portfolio revenue guidance lowered to $1,680–$1,690 million, down 2–3% year-over-year.

• Full-year Adjusted EBITDA guidance reduced to $340–$350 million.

• Q3 revenue guidance for the strategic portfolio is $415–$420 million, down 4–6% year-over-year; Q3 Adjusted EBITDA guidance is $75–$80 million.

• Double-digit growth is expected to continue in the Create subscription business.

• Liquidity is expected to be sufficient for at least the next 12 months, with $750 million remaining under the share repurchase program.