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Unity Software - To infinity and beyond?

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JP_mykayaplus wrote a column · May 13, 2023 03:59
Unity Software - To infinity and beyond?
$Unity Software(U.US)$ released its Q1'23 results.
Share prices popped after that, but corrected downwards again.
There is a mixed bag of aspects to take note of. But overall, I would say it's a good one, with a few points to take note of.
Here are some points to take note of.
1. Revenue grew by 56% YoY with IronSource contribution
Source: Unity Software Shareholder Letter
Source: Unity Software Shareholder Letter
Grow Solutions was the outperformer here, with a revenue contribution of USD 313 million, growing by 101% YoY. But Create Solutions is anticipated to accelerate throughout the year behind the Editions price increase and the adoption of digital twins and acceleration in China.
2. Customers contributing to more than USD 100k grew in spite of drop in DBNR
Source: Unity Software Shareholder Letter
Source: Unity Software Shareholder Letter
With IronSource and Weta now under Unity's portfolio, customers that contribute to more than USD 100k grew significantly since Q4'22.
But the dollar-based expansion rate is dropping. It used to be in the range of 140% but has now been whittled down to 107% and shouldn't experience erosion anymore.
3. GAAP net loss is still high due to stock-based compensation
Source: Unity Software Shareholder Letter
Source: Unity Software Shareholder Letter
Apart from the dropping DBNR, shareholders or investors should take note that even though gross profit increased on top of higher revenue, GAAP net loss deepened.
This is mainly due to higher stock-based compensation expenses. A higher stock-based compensation also indicates a higher dilution rate of the weighted outstanding shares available.
Should the company fail to grow, investors are at risk of worst results.
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