Key Takeaways:
Unity Software reported Q2 revenue of $546.5 million, up 24% year over year and beating consensus by about $32 million.
"This was arguably the best quarter in Unity's history as a public company," Chief Executive Officer Matt Bromberg said.
Adjusted EPS came in at 28 cents, topping the consensus estimate for a loss of 9 cents. Adjusted EBITDA rose 77% to $160.2 million, with margins expanding 800 basis points to 29%. Free cash flow reached $202 million, up 59%, lifting the cash balance to $2.36 billion as the company moved to a net-cash position.
Shares rose 4.9% to $42.80 in pre-market trading. The company guided third-quarter strategic revenue of $540 million to $550 million, up 44% to 47% year over year, and adjusted EBITDA of $185 million to $190 million, implying a 33% margin.
The Vector advertising platform drove the beat, growing 23% sequentially against a 12% to 13% expectation and reaching an annual run rate above $1 billion, two quarters early. Strategic Grow revenue rose 63% to $329 million, while strategic Create revenue climbed 14% excluding a one-time prior-year item to $157.5 million. Unity also pulled forward its expected GAAP net-income profitability to the third quarter from the fourth.
BofA Securities upgraded the stock to Buy from Neutral with a price target of $50, and Deutsche Bank raised its rating to Buy with a $50 target, both citing the Vector momentum. Unity completed the sale of Supersonic to Tripledot Studios on Aug. 4 and closed its ironSource ad network in April, actions CFO Jarrod Yahes said will lift second-half margins.
The guidance raise signals management expects Vector's growth to persist as the company begins feeding runtime data from roughly 3 billion monthly players into its ad models. Investors will watch the Unity 7 beta launch in the fourth quarter, which management expects to expand the creator funnel and feed more games into the ad platform.
This article is for informational purposes only and does not constitute investment advice.
