Unity announces layoffs despite increased revenue and reduced losses

Unity has released its financial results for the three months ended September 30, 2023, announcing layoffs despite a significant growth in revenue and a drop in overall net loss.

The numbers

• Revenue: $544 million (up 69% year-on-year)
• Net loss: $125 million (compared to $250 million last year)
• Create Solutions revenue: $189 million (flat year-on-year)
• Grow Solutions revenue: $355 million (up 166% year-on-year)

The highlights

Unity's revenue increased 69% year-over-year to $544 million, while it reported a net loss reduced by half to $125 million, compared to $250 million during the same period last year.

Despite this, Unity has announced more layoffs as a result of a "comprehensive assessment of its product portfolio" at the beginning of its fourth quarter, as detailed in its Q3 2023 report.

"The assessment will likely lead us to decide to discontinue certain offerings, reduce our workforce and reduce our office footprint," the company said.

It added: "The timing and full impact of these types of changes on our future results of operations, cash flows, or financial condition are uncertain, and for those reasons we are currently unable to reasonably quantify the potential impacts through the fourth quarter of 2023."

As a result, the company did not provide any guidance for Q4 or the full year 2023.

During Unity's earnings call (transcribed by Seeking Alpha) following the release of its Q3 results , Unity's CFO Luis Visoso said decisions would be made and implemented during this quarter, with a target of being finalised by Q4 2023.

"It's not like a business model transition that takes a year or two years to complete," said Visoso. "These are things we were planning to do and executing now."

This was referred to as a "rip off the band-aid reset" by interim CEO James Whithurst.

Looking at Create Solutions revenue (the division in charge of Unity's engine), core subscriptions were up 19% during Q3 but revenue was flat year-on-year.

"Three sectors negatively impacted growth this quarter: Unity Game Services (UGS), China, and professional services," the report read. "UGS had a record third quarter last year from new game launches, China revenue declined from continued government restrictions on gaming, and we continue to reduce our reliance on professional services."

As for its Grow Solutions vertical (Unity's ads products and services), revenue increased by 166% year-on-year to $355 million despite the backlash in response to its proposed runtime fee announced in September.

"We continue to believe that we are gaining share in a relatively flat market," the company said. "We experienced some revenue softness at the end of the quarter and in October from the runtime fee introduction, which is now mostly behind us."

In the letter to shareholders, Whitehurst said Unity was "doing too much" and aimed to "emerge as a leaner, more agile, and faster growing company" for the next quarter.

He added: "Going forward, we plan to increase our focus on our core; the Unity Editor and Runtime, and Monetisation Solutions as we continue to see significant opportunities for growth in these businesses, including AI.

"In addition, we aim to sharpen our focus on fewer large and more attractive businesses where our capabilities offer a clear competitive advantage like Digital Twins."

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