Unity Software Inc. Q4 FY2022 Earnings Call

Welcome to Unity's Fourth Quarter 2022 Earnings Call. After the closing of the market today, we issued our earnings press release and shareholders' letter. These materials are now available on our investor website at investors.unity.com. Today, I'm joined by John Riccitiello, our CEO, President and Chairman; and by Luis Visoso, our CFO. But before we begin, I want to note that today's discussion contains forward-looking statements, including statements about goals, business outlook, industry trends, market opportunities, expectations for future financial performance and similar items, all of which are subject to risks, uncertainties and assumptions. You can find more information about these risks and uncertainties in the Risk Factors section of our filings at sec.gov. Actual results may differ, and we take no obligation to revise or update any forward-looking statements. Now as in prior quarters, we are providing both GAAP and non-GAAP financial measures. And unless otherwise noted, we will be speaking to the non-GAAP financial measures when describing our results. The shareholder letter and press release are available on the Unity Investor Relations tab as well as sec.gov and includes full GAAP to non-GAAP reconciliations. Thank you very much. As you all have seen, we've published our shareholders letter this afternoon. And before we go into Q&A, let's start with opening up to Q&A. But before we get to that, we've received a handful of questions that we're getting from investors. And the first one is for you, John. John, we've received a lot of questions about the macro environment, specifically in the mobile game market and industries and the digital twins side of our business. Before we go into broader Q&A, maybe you could explain how you see the macro environment playing out for Unity. And then I’ll have one quick question for Luis as well.

Sure. So broadly, the macro environment remains surprisingly resilient. If you look at the gaming industry, our developers are as productive as they've been before. They're producing a huge number of games. Their investment against game development is holding up well. We're seeing strong DAUs or users in our network suggestive of overall gameplay that remains strong. Within the industry side where we reported over 100% growth last year in digital twins, there continues to be very robust demand. There may be some elongated sales cycles where people take a little bit longer to decide, but when you've got demand far in excess of our ability to supply, we're in a pretty good spot and we're not feeling a pinch. All in all, the market seems stronger than you might expect, especially when we're indexing against such unusual years like the work-from-home or learn-from-home era. A couple of very specific points: the ads market has stabilized since the middle of 2022 and continues to be stable now. What’s happening is that strong user engagement has been offset by weaker eCPMs than we historically see, but again it’s been stable. At some point, that flips and we're not expecting it to flip. We're using that in our models looking forward. We want to be conservative. But overall, the markets are solid. There is not a lot of concern here.

Great. Thanks very much. And Luis, the question that we get oftentimes for you would be how are you thinking about balancing growth and profitability? And how does that fit into the guidance that we issued today?

Yes. Thank you, Richard. What I would say is on the revenue side, just like John mentioned, we’re taking a prudent assumption on the market, and that is reflected in our revenue guidance. It is clearly better to plan this way in this environment. Now on the cost side, we’re taking very clear actions to improve profitability. This includes things like the elimination of close to 300 roles that we announced earlier, being very selective in any future new hires that we add to the company, being more focused in our investments, and reducing the number of beds that we make at Unity, raising the bar on costs. We’ve been turning every stone once or twice and finding new opportunities in a few places, and that frankly includes reducing the number of shares that we grant as part of compensation. So we’re taking a very holistic view on costs and making sure that they add value. As a result, you should expect to see costs relatively flat during the year as revenue grows quarter-over-quarter. We expect to significantly improve profitability in 2023. If you look back, we had a loss of $90 million non-GAAP in 2022, and we expect adjusted EBITDA to be somewhere in the range of $230 million to $300 million in 2023, a very significant swing from one year to another. In 2022, we were only profitable in Q4. In 2023, we expect to be profitable every single quarter. The profitability improvement that you see year-over-year comes about 50:50 from Create and Grow. We’re making progress across the board, taking more conservative assumptions on the market while being very proactive on costs with decisive actions to improve profitability in this environment.

Great. Thank you very much. Now we can open it up to questions from the analysts on the call. Here we go. The first question is from Matt Cost at Morgan Stanley.

Hi, everybody. Can you hear me?

Yes.

Yes.

Great. Thanks for taking the question. So maybe just one thing in the letter. You mentioned the drivers that create revenue growth being pricing, China, and digital twins. Should we assume that that seat growth is kind of going to be under pressure or stable this year because of some of the issues going on just in your customer base in the mobile gaming market? That’s the first question. The second question is just when we look at the ramp in EBITDA, I think, the guidance for the first quarter is $7 million to $12 million, and the full-year number is $230 million to $300 million. So that's a pretty significant step up in just dollars of EBITDA as we move through the year. What should we think about as the drivers of that? Thank you.

Luis, do you want to start with this one?

Yes. On the second part of your question, Matt, as I just said, we expect costs to be relatively flat during the year. As you know, we have a very healthy gross margin. As we get revenue growth quarter-over-quarter, we reach those profitability levels. That is basically the assumption and where we’re working against. Very importantly, Matt, some of the actions that we’ve taken on costs don’t fully impact Q1. They only impact Q1 partially and obviously have a full quarter impact in Q2, Q3, and Q4.

In terms of seats, we don’t normally guide on the seats, so we don’t call it out in particular. Our intent going forward is obviously to increase the number of users. The game industry continues to be strong, and our shares across every platform continue to be very strong. We called out in particular pricing in China because those are important drivers of our sequential growth, Matt. One of the areas I expect to see strong growth over time around seats is professional artistry. We can discuss that a little more, but how tools like Weta and Ziva, and the things that we’ve acquired are coming to market in the coming year, bringing new customers and new seats, et cetera. So we don’t feel like there's any issue on the seat side. It’s really we’re calling out particular growth drivers.

Great. Thank you.

And Jason Bazinet from Citi.

I just had a simple question. Just maybe this is for Luis. Sequentially, new Create grew about $9 million, and I think old Create grew about $13 million, which implies either strategic partnerships or UGS may be contracted a bit. Is there anything that is noteworthy there or anything that you’d call out?

Yes. Jason, good point. You may remember, in Q3, we had a very strong strategic partnerships business. We commented on that in this call, and that is a business that will have ups and downs just based on when deals are signed. That’s why it’s essential to look at the Create numbers on a stand-alone basis where you actually see, as you just mentioned, an acceleration from Q3 to Q4 in terms of the total dollars added quarter-over-quarter.

Okay.

So that’s the clean apples-to-apples view.

Okay. And do you mind if I ask one follow-up?

Go ahead.

It seems like the tensions with China, whether it’s been advising against using the big four accounting firms or some of the changes that we made related to chip exports are increasing. I know China isn’t the biggest market for you geographically, but is that a concern investors should have, or do you think it’s ring-fenced to manufacturing and the big four accounting firms?

Let me take the top of that one, Luis.

Yes.

So, China is the biggest gaming market in the world. Let’s just start with that. We’re the market leader in China in the businesses we operate there, so it's very important to us. Apologies, I'm getting over a cold, guys. We've made a change in our structure in China that we believe better sets us up for long-term growth in China versus the structure we had previously. There's been renewed interest and demand for digital twins. China is important, and we’ve set ourselves up for long-term growth there.

Great. I think the next call should be from Goldman Sachs. Are you guys on? Check to see if it’s Kash Rangan. We don’t have it. All right. Let’s go to Brent at the moment, Brent Bracelin with Piper, please.

Great. Can you hear me okay?

Yes. Hi, Brent.

Perfect. I guess, John, maybe we’ll start with you. Mediation was one of those missing pieces of the Unity Gaming Services offering, and I think that you addressed with ironSource. What have you learned so far in Q4 as you think about some of the functionality they bring to these services? Maybe give us a sneak peek into what mediation can help with as you think about the ad market in 2023 here?

Thank you for asking that question because it allows me to address something I wanted to mention on the call. We’re seeing strong interest in the combined offering that we have with the collection tools like LevelPlay and the two ad networks. We are seeing market share growth. We’re picking up customers under our mediation platform which drives increased share of wallet. These things are not instantaneous. You come to an agreement to do these things. It takes engineering time and effort to bring them onto our platform and it's typically phased. There’s not a significant impact in our Q1 from the market share gains we’re seeing, but we expect to gain market share in Q1 and throughout the year, which is why we’re confident in predicting growth for the business for the year. Essentially, what we’re trying to convey is we’re seeing, starting from the middle of last year, a stable market for the advertising business. We expect that to pick up at some point. Luis and I made a hard call a while back to say, no matter what anyone tells us, we aren’t going to predict a recovery in 2023, even though many folks would argue there should be by the end of this year. We’ve chosen not to do that to put a stronger focus on cost and benefit from the EBIT leverage that comes from that. So within that stable market, we’re predicting market share growth and are already seeing it in the marketplace. The integration with ironSource Unity is going well. We have not lost a single executive, which is typically not the case in these situations. There’s a lot of work that Tomer on the growth side and Mark on the create side are working to drive synergies between the platforms in terms of how we go to market and bring customers onto our platform. We think that’s going to pay a lot of dividends over time. The word synergy, you’re going to get sick of over the next several quarters as we discuss how we’re generating better outcomes for our customers and better outcomes for us as a combination of a singular end-to-end platform. We talked about that in the shareholder letter. It’s going to be a recurring theme for us because we have exactly what we were looking for: a hand-in-glove combination of tools and services that will strengthen the entire platform more than just the additive combination of the two businesses. So, market share growth through the year, heavy emphasis on synergy going forward, and with that, the EBIT leverage that Luis discusses.

Helpful color. And then just one quick follow-up for Luis here. If I look at the net retention number, ex-ironSource, it downticked a little bit this quarter versus last quarter. What do you view baked into the 2023 outlook either on a combined basis or an ex-ironSource basis? Just trying to think through what’s contemplated from a net retention perspective in the guide.

Now you want me to guide on our expansion rate. So Brent...

You always want more, Luis.

I think overall, I’ll just repeat what John said, which is we are expecting to expand market share, both in Q1 and Q2. That would imply we should be seeing a net expansion rate above 100% clearly for the year. I don’t want to provide a precise number unless with and without ironSource. But yes, that’s what it implies.

Helpful color, thank you so much.

Thanks, Brent.

Great. We should have – here we go. Gili for Kash. So Goldman Sachs, are you ready? Okay. Well, do we have Thomas, do we have other people on the – there we go. Dylan Becker at William Blair, please.

Hopefully, you guys can hear me. Maybe John, starting off, I think there was an announcement not too long ago, and we spent a good bit of time talking about what live and interactive games can look like for the industry. But how important is that partnership you guys announced with Google and expanding the opportunity for UGS and maybe the ability to improve monetization for developers looking to capitalize there.

Well, I’d say that Google is one of our best partners. We partner with them on a number of fronts, as we do with many of the major mega caps. So we’re deeply partnered there and that’s super important to us. We have massive faith in the long-term growth prospects for UGS. It is going to be a very major business for us in the long-term, and it’s already a substantial business for us. So it’s an area where we’re focused on for growth. We’ve got a really strong general management team driving it right now and are working on bringing more customers onto the platform, feeling good about the offering. It is a very competitive offering in terms of high performance and a good cost equation for our customers.

Super helpful. Maybe if we can talk on it, we haven’t spent a ton of time on the Aura piece of the business as well. Maybe some near-term device headwinds there, but how do you guys think about the opportunity for global connectivity going forward and potential monetization opportunity and touchpoints being afforded by being embedded across a lot of devices?

Aura is a very strategic business for us. It came along with the ironSource acquisition. It’s a device management business. They operate at the carrier level, around the app store. We drive a great deal of data but we also drive meaningful revenue from it. Our offering, we believe, is well differentiated from the principal competitor in this space, Digital Turbine. We can’t get too specific because when we talk about winning market share, it’s like winning a major national carrier. These deals are not like you pick up 0.5 points a day or a quarter. These are material trends. We’re confident we’re gaining here. We have been prior to Unity’s ownership, and we expect to going forward. I would love to show you what our pipeline looks like; it would make you happy to hear what our pipeline looks like. But I can’t get into further detail on that. We feel really good about that business. If you think about – if you’re Unity, we’d love if you take, for example, a mobile ecosystem. We love that we’re the leading platform for creation on both app stores. We love that we’re one of the leading monetization user acquisition platforms across the entire industry. We love that we’ve got a meaningful device management business. We love that these things come together to create an end-to-end platform that makes our customers more successful when they use our platform. It’s that end-to-end, highly synergistic platform that differentiates Unity from anyone and everyone. We feel really good about our ability to bring all that together synergistically. Luis and I are going to be saying about synergies now for years to come. It’s – it’s our theme song.

Super helpful. Thanks, John.

We won't ask you to do it here, but maybe later. I think we have you on now.

Yes. Hi, everyone. It’s Gilly on for Kash. Thanks so much for circling back and congrats on the strong Q4. Can we quickly touch on any customer behavior you’re seeing – now they have Unity and ironSource under the same HUD and a decision to ultimately keep supersonic in your growth category, what was the rationale behind that?

I’m not sure I quite get the customers that we’re getting because we work together?

Yes. Or any synergies you’re seeing between creating growth at this point if the ironSource deal has helped you in getting customer synergies just to utilize that word as well.

Let me give you this in a sort of a time-phase way. In the present moment, we’re winning customers in mediation, which is a very lucrative outcome for us, and an important driver of the EBIT performance we’re going to see through the year. That added market share and share of wallet yields a more profitable Unity. That’s happening precisely right after the acquisition because we’re carrying to market a powerful message. That power drives a better performance for our customers. These are things that come about as a result of a presentation. We are engineering in, for example, the supersonic editor to make it an easy platform for our customers to take their products directly to market without ever leaving the environment. There’s a lot of places where the tool set, whether it’s Luna or supersonic or parts of LevelPlay and the integration shows up. Our customers are going to take advantage of a more performant platform to create, publish user acquisition or monetize directly. We’re also doing some things for engineering in, and that’s what we’re working on right now. That combination of being a better story is the starting point. The second point is engineering the advantages that our customers need and want. It’s more than just supersonic and LevelPlay, it’s the two networks, ironSource, et cetera. All of the create tools, for example, whether it’s Artistry, as we introduce AI to the equation as we bring simulation to the equation, things that they need for better content creation, more cost-efficient content creation. UGS is part of the platform that has enabled our success in that space. Really what it’s about, and I hate to wax on about synergy, synergy is partly about the story but more about engineering a simpler, holistic approach for our customers to leverage for more successful business. We will be discussing this each and every quarter for probably years to come.

Great. Well, I mispronounced your name. Arsenije from Wolfe. But please ask your question. Thank you so much.

Can you guys hear me?

Yes.

This is Arsenije on for Gal. Thanks for taking my question. I wanted to ask whether you could parse out roughly what the growth of non-gaming Create was, excluding Weta and UGS in Q4? And then I had a quick follow-up.

Luis, do you have that?

Yes, we’re not providing it by quarter, right? We put in the note, you see very strong growth, 118% is the exact number for the year for non-gaming, that includes the Weta growth, which we isolated before. We told you at the beginning of the year that would be about $70 million. The other thing that you saw is an increase as a percentage of our business. On a comparable basis, we went from 40% that we announced six months ago to about 41%. We're clearly seeing an acceleration in that business and expect that to continue into 2023.

Thank you. That’s helpful. And then just quickly on one of the metrics in terms of customers over $100,000 in the contribution from ironSource. I believe the last published number for ironSource for customers contributing over $100,000 was $446 million, and that number is now $284 million backing that out. Is that just due to the revenue recognition for ironSource because of the timing of the acquisition? Or was there some kind of churn that happened in ironSource relative to the last published in Q2 2022?

No, it’s not bad. What happens is that some of the larger customers were also large customers for us. You cannot just add the numbers. Some customers just became larger for us, but they were already counted in our customers above $100,000. You see that?

Yes. Perfect. Thank you. Makes sense.

Which is a good combination because we acquire new customers, which is terrific, but we also penetrate some customers even more, which is very helpful. So we had a healthy combination of both.

Right. Do we have any other questions from folks in the audience? Mario from Barclays.

Thank you for the question. I have one about the seasonality of the joint business. Regarding what we observed in Q4, you mentioned it was unclear on the combined financials compared to the Q1 guidance of 475. I'm wondering if that sequential decrease is primarily due to the Create side of the business or the grow segment. Thank you.

Yes – do you want me to take that, John?

Yes, please.

So Mario, it’s very difficult to talk about seasonality over the last few years, given all the factors that John explained. COVID, the economy, just name it. But to answer your question, yes, we are taking a prudent view on the market and it’s for both businesses, particularly for the growth business. That’s where we are being even more conservative on the business. I don’t want to give you a forecast for each of them for Q1. We are being prudent there on the assumptions in the market. You will see normally in Q4 a strong professional services business, so that will be one thing to always watch. Seasonality will be driven by the other factors we mentioned. That’s the way to think about it, Mario.

Seasonality right now just in terms of speaking to it is, I’ve continued to say today that we’ve seen stabilization in the ads business starting in the middle of last year. The beginning of last year was exceptionally strong. We had the second wave of COVID. People returned home or went home from school. We had very elevated Q1s in the industry. It’s very hard to read seasonality. In a normal year, you’d say the growth side of the business, Q4 is the strongest quarter, Q1 is the second strongest, remaining a little elevated after the Christmas holidays, then a little growth as we go to Q2 and Q3. Within the game side of the business, you'd say Q4 is the strongest, although in mobile, it tends to be more even, but there is increased consumption in the fourth quarter. That’s been true for many years. We drove a truck through it like three different ways: COVID, work from home, issues around a recession. It’s been very hard to read the underlying signal. Again, which is why we’re emphasizing right now what we’re seeing is really strong consumer engagement in games, a strong pipeline outside of games and Create, stabilization in the ads business based on strong consumer engagement and slightly weaker eCPMs, typical of a recessionary period we would recover from at some point.

Great. That’s very helpful. And maybe just a quick follow-up in terms of the commentary of the game market being approximately down 10% this year, year-on-year. Some other companies are saying it’s stabilizing to improving, but is your point that the first half is just a very tough comp?

Precisely, you’ve got that right. We’ve added more color than others. Yes, it’s stabilized since the middle of last year. The beginning of last year was exceptionally strong, and so the market in the first quarter of last year was up in the mid-20s growth-wise. We’re lapping a stronger period. Even though it’s stable, we’re still comparing against a strong period. The second half of this year won't be as strong, so we will be comparing to the second half of 2022, which was flatter. That’s where we get to minus 10% in aggregate if you’re modeling the whole year. We see the market has stabilized, and we’re providing additional color that the year-over-year indexes for served ads will be down in the first and second quarter; it’s year-over-year versus a quarter-over-quarter view.

That’s very helpful. Thank you guys.

Great. Parker Lane.

Great. Thanks for taking the question, guys. Luis, circling back to net expansion rates for a moment. I was wondering if you can give us a qualitative sense of how Grow is compared to Create recently? And if I look at the non-gaming segment in particular, what impact and future impact do you expect from the introduction of new pricing initiatives and perhaps consumption models on the non-gaming side? How much of a tailwind can that be to expansion going forward?

Yes. If I look at the Create side, the net expansion rate has been fairly stable and very healthy. The reductions you’ve seen over the last two quarters have come mainly from the Grow side. What we’re seeing in this quarter is fairly consistent with that. The pricing that we’ve taken is mostly on the game side; the non-gaming side has really different business models and different monetization models. We’re improving how we monetize each of our customers. The pricing plans we discussed in the last call have mainly focused on the gaming side. We’ll see another effort on the non-gaming side where we’re trying to monetize our customers much better. This includes subscription businesses, consumption business models, and capturing more of the value we’re creating for our customers.

It may seem counterintuitive that we increased prices last year in the game sector, but we expect it to drive sequential quarter-to-quarter growth through 2023. We honor existing contracts at the price that they were signed, so as existing contracts terminate, customers renew at a higher price. Pricing is driving growth for us this year despite the fact that pricing was taken last year due to when our customers come on to it. The second thing was in the third quarter call, I framed up our Digital Twin platform, which has gone into general availability. We’ve got many customers coming onto that. It’s incremental ratable revenue that we expect to see as a major business for us in the quarters and years to come. I hope that provides insight into what you’re asking.

Yes. Thanks for the color, guys. Appreciate it.

Okay. Stephen Ju, over at Credit Suisse.

All right. I was wondering if you can give us the latest in terms of expectations on the timeline for the productization. What I guess, bidding game and media sectors will probably be the first adopters, but what additional sectors can you see that you can onboard here who you might not have seen before? Directionally, I think this is a product that’s had a client base of one. So from a pricing perspective, go-to-market sales motion, if you can just add a little bit there. Maybe it’s a little bit too early to talk about that now, but just initial comments you might be able to offer as you think about going to market with what will be a productized Weta? Thanks.

When we talk about productizing professional artistry, we mean more than just Weta, although Weta is a substantial part of it, but also tools like Ziva and SpeedTree add to our professional artistry portfolio. There are several products we’ve been discussing. Mark talked about some in a couple of calls ago within the Weta portfolio that we are commercializing this year, and we’re already in customer conversations. The most interest is currently coming from the film industry and the game industry, no surprise there. I won’t disclose who we’re talking to in ongoing negotiations, but we see, at least according to our internal plan, we’re tracking well. The products are coming to commercial opportunities in the timeframe we anticipated, if not a bit earlier. We’re finding good interest in our primary markets, so in summation, it’s going as we expected when we made the acquisition announcement. Luis?

I would just say, John, that it’s consistent with what we said before. It will take us two years. It’s a lot of work to bring the tools to the cloud and make them available to many customers.

Thank you.

I think we have another four or five minutes.

Great, thanks. Can you guys hear me?

Yes.

Thanks. I’ve got two or three quick ones on the ironSource deal. I wonder maybe first off, could you give us a bit more color on the integration effort? I know you said that it’s all going well and the synergies all look good. I just wonder things like will you keep a couple of DSPs separately or will you combine them in terms of any technology integration issues that may come up? Anything you can give us in terms of color, because I can imagine it’s not necessarily easy to always do these sorts of things. Relatedly, you did mention the data ingestion issues from last year at one point. Are those completely gone now? Do we need to know anything more about that? Did ironSource help in any way with that or was that after the fact? Lastly, maybe one more on Aura, I guess is maybe where this comes in. You and ironSource both are very heavily into the gaming sector. You have a lot of non-gaming businesses on the create side. I guess ironSource is mainly gaming, but are there opportunities to expand your ad tech services given the broader client base that you can offer as well as what Aura could bring in given the other sectors that it touches?

First off, you get credit for a 12-part question. We’ll do our best to remember it all as we respond. The first one to get out of the way is the data issue was out of the way before we completed our merger, in fact, before we announced it. The second thing on integration: we’ve already largely integrated teams. Omer, for example, is essentially the Chief Revenue Officer for growth. We consolidated two sales organizations under him providing focused leadership. We also consolidated products and engineering under Ingrid. We’ve brought teams together to achieve a singular focus on delivering the right outcomes for our customers. The engineering and product teams are working together, and in terms of engineering and data, we’ve already accomplished the primary data merge, leading to better outcomes for our customers. We’re applying tools from one side of the equation to the other. I won’t get into the specifics because it would take a while to define most of what these tools do, but there’s one tool we expect to have a favorable outcome for our combined ad network based on bringing a tool from one side to the other. Beyond that, create to grow – they’re doing the same thing at a higher level. As for Aura, for those unaware, part of what Aura does is it drives installs of game and non-game applications on Android devices globally based on carrier relationships. This effectively brings us into the ads business and gaming. Driving installs outside of gaming represents a significant opportunity for Unity; some of those will be our create customers. That particular point is more of next quarter’s discussion internally to Unity.

Excellent. Thanks for that.

Okay. And if I slip in two more and finish up. First, we’ll start with Jonathan and then we’ll conclude with Franco.

Okay, great. Can you hear me?

Yes.

Great. Thanks for letting me get in here and ask my questions. Actually, most of them have been answered. Just wanted to ask the rationale behind combining strategic partnerships with create. It makes sense that you would have create, add some of the stuff from operate and operate to become grow, but why would you not leave strategic partnerships separate like you did before? Thanks.

The majority of the revenue is very create-centric, pretty simple. Revenue is derived from a platform holder to enable create to work better. It was more pattern matching. It was like this is very much like a create business. We held it out separately because it had a different sales cadence and type of deal structure. But when we tried to figure out where to fit all the different pieces post-merger, this was the obvious place for it. Luis, you might want to add to that.

I totally agree, John. We manage the teams together, and that causes synergies because one drives the other. We thought that would be the most natural thing to do, Jonathan, but we’ll be transparent as I was at the beginning of this call and where we see volatility driven by strategic partnerships that we need to call out.

Okay. Great. Thank you.

All right. Not the least, but the last, Franco, why don’t you tee it up for finishes up.

Right. Yes, John. So on LevelPlay, you talked about some of the show can you have, and you noted variability and lead times. Can you speak to whether this is from developers that are new to the market, or are you leveraging the relationships on the ironSource side and getting someone that is perhaps a bigger-scale player? What is your strategy to gain business from some of the large publishers that are currently in other platforms?

For some reason, that broke up a lot from me on my end hearing that, there’s like half the words, Richard, you catch the question, I can summarize it back.

Franco, why don’t you summarize again because I lost the same thing.

I need to get a new headset. The question was really around LevelPlay. Are the customers brand new to the market? Or are they bigger in scale? What is your strategy to gain big publishers from other platforms?

What is the strategy for other platforms relative to LevelPlay? What I’ll mention is that prior to the merger, LevelPlay was more successful with smaller, independent players and Unity had relative strength with larger players. We’re now closing more of the larger players. That feels like a synergy with LevelPlay. If you’re thinking about the synergy of Create to LevelPlay, integrating LevelPlay into Unity is a winning strategy, remember 70-odd percent of mobile games are built in Unity. That was very apparent at one of their launch events last year; all those there were Unity customers. There’s big synergy in that direction as well because they all weren’t yet LevelPlay customers. They were shopping at levels like that, but they’re all Unity customers. Does that get to what you were asking me about?

If your question is why do we expect LevelPlay to grow market share, we believe that it’s the best mediation out there in the market. That’s what you saw before; everything changed in the market. We continue to believe it’s the best performing, and that will attract our customers back.

Luis and I just did a portfolio review with the team yesterday. By name, by customer, we’re seeing customers coming to the platform. So we’re not believing it. We think it’s better for our market share overall, and we’re looking at the exact customers coming over and our migrations that our engineering teams are implementing. For us, it’s proof that they’re coming over for those reasons.

That’s why we can talk about market share gains, both in Q1 and for the year.

All right. We – Kash Rangan from a top double black diamond slope. So we can – Kash is the second question.

Thank you so much. Wouldn’t be Unity Software anything. Thanks so much. Congrats on the quarter. I’d like for Gilly’s comments. John, as you take a step back, now your index to the opportunities in Weta, a little bit over-indexed to the pickup in the advertising market through the acquisition of ironSource, and also indexed to what’s going on in the Create side with Digital Twins. How should we think about how you as CEO are prioritizing your investments so you get the best bang for the buck in each of these markets depending upon the relative importance and what that could mean for what really drives Unity in the future? Thank you.

First off, to know what drives me as the CEO is a very rich conversation between Luis and me and the principal C-level officers regarding the opportunity in front of us. One frustrating aspect is the shift from a go-go market to a tough recessionary environment leading to a market correction. We had programs that we liked in a different economic situation that are now deprioritized. For example, the sports and live entertainment technology is something customers want. We deprioritized that given the current economic environment. However, we have not deprioritized Weta because there’s already a meaningful revenue stream and an excellent opportunity for professional artistry to grow a bigger and better business. Most creators globally aren’t coders, they’re artists. They want those artistic tools. Looking at our two businesses, Create and Grow: Grow typically has engineering cycles for product development inside a couple of quarters. Many products on the Create side require multiple years, certainly multiple quarters. For instance, our Digital Twin platform took 18 months to develop to generate ratable revenue. We focus on ROI timeframe. Investing in the cloud platform for Digital Twins and UGS for games is crucial, as we believe it will yield future revenue. We’re already paid by the seat for creating, seeking a second revenue stream in solving a significant problem for our customers. Despite modest revenue growth, we’re securing strong profit growth year-over-year; we prioritize that and will deliver.

Great. All right. Thank you so much. We got done a little bit late, but that was pretty quick and efficient. Thank you all, and we’ll hope to see you on the road or at various conferences. Thanks a lot.

Thanks all.

Goodbye.