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Notes on $U & its earnings release for Q4'20, FY20
Some remarks from an amateur investor
TLDR:
Mispriced valuations v perf
Stronger headway to non-gaming verticals
Goodgaming user metrics
3% IDFA to FY21 Revs
Promised profitability by 2023 (FCF)
Thread
Some remarks from an amateur investor
TLDR:
Mispriced valuations v perf
Stronger headway to non-gaming verticals
Goodgaming user metrics
3% IDFA to FY21 Revs
Promised profitability by 2023 (FCF)
Thread
2/
Looking back, my original thread on $U is mostly exploratory and does not provide any informed analysis as to its future growth prospects + bullish catalysts
Hence, it is impt to furnish material info to my thesis. If interested, my original thread: https://twitter.com/JoeyKoh_/status/1329807148633649152?s=20
Looking back, my original thread on $U is mostly exploratory and does not provide any informed analysis as to its future growth prospects + bullish catalysts
Hence, it is impt to furnish material info to my thesis. If interested, my original thread: https://twitter.com/JoeyKoh_/status/1329807148633649152?s=20
3/
My sources:
https://s26.q4cdn.com/977690160/files/doc_financials/2020/q4/Shareholder-Letter-Q420.pdf
https://www.fool.com/earnings/call-transcripts/2021/02/05/unity-software-inc-u-q4-2020-earnings-call-transcr/
As well as other tweets I've seen about $U
My sources:
https://s26.q4cdn.com/977690160/files/doc_financials/2020/q4/Shareholder-Letter-Q420.pdf
https://www.fool.com/earnings/call-transcripts/2021/02/05/unity-software-inc-u-q4-2020-earnings-call-transcr/
As well as other tweets I've seen about $U
4/
Some user-related metrics:
Q4'20:
71% of top 1K games made with $U (Apptopia)
MAU up 63% to 2.7B monthly (all devices excl consoles + incl paying/non-paying creators)
Apps built w Unity downloaded 5B/month up 41%
Quite the company of the mobile generation
Some user-related metrics:
Q4'20:
71% of top 1K games made with $U (Apptopia)
MAU up 63% to 2.7B monthly (all devices excl consoles + incl paying/non-paying creators)
Apps built w Unity downloaded 5B/month up 41%
Quite the company of the mobile generation
5/
Other metrics & info:
Q4 Rev:
220m up 43% YoY (10% seq)
100K custs up ~32% seq
Create/Operate/Strat. Partnerships growth:
39%/61%/(19%) YoY
DBNER 133% -> 138% YoY
Losses impacted by on SBC increase
DBNER & likely 100K custs +ve benefited *more* from COVID
Other metrics & info:
Q4 Rev:
220m up 43% YoY (10% seq)
100K custs up ~32% seq
Create/Operate/Strat. Partnerships growth:
39%/61%/(19%) YoY
DBNER 133% -> 138% YoY
Losses impacted by on SBC increase
DBNER & likely 100K custs +ve benefited *more* from COVID
6/
Guidance:
Mgmt went for 23%-26% FY2021 growth
From shareholder letter:
COVID impact +3% of FY2020 rev
IDFA impact of -3% of FY2021 rev
"Our goal is to build a company that delivers revenue growth of approximately 30% over the long run."
Sounds about right
Guidance:
Mgmt went for 23%-26% FY2021 growth
From shareholder letter:
COVID impact +3% of FY2020 rev
IDFA impact of -3% of FY2021 rev
"Our goal is to build a company that delivers revenue growth of approximately 30% over the long run."
Sounds about right
7/
My thoughts so far:
+ user engagement metrics
+ IDFA impact limited
- "Price for perfection" (i.e. valuation) & did not deliver
- See pic attached
Numbers & prices tells 1 side of story, but there's alot of things I've seen that say it's hard to quanitfy future prospects
My thoughts so far:
+ user engagement metrics
+ IDFA impact limited
- "Price for perfection" (i.e. valuation) & did not deliver
- See pic attached
Numbers & prices tells 1 side of story, but there's alot of things I've seen that say it's hard to quanitfy future prospects
8/
CC notes:
"These record results [metrics at 4/] don't directly translate to revenue in many cases, but they are indicative of the strength of our franchise and the ecosystem we support."
This is telling of $U's eventual end-game (oops), which is "ecosystem"
CC notes:
"These record results [metrics at 4/] don't directly translate to revenue in many cases, but they are indicative of the strength of our franchise and the ecosystem we support."
This is telling of $U's eventual end-game (oops), which is "ecosystem"
9/
Its interspersed throughout the CC, but CEO mentions
"When a creator works in Unity, they're working an enormously powerful tool... anything they need with four or five buttons" [on Forma]
"when we're closing new seats on chains, it's artists"
Unity not just for game devs
Its interspersed throughout the CC, but CEO mentions
"When a creator works in Unity, they're working an enormously powerful tool... anything they need with four or five buttons" [on Forma]
"when we're closing new seats on chains, it's artists"
Unity not just for game devs
10/
They're permeating across 2 fronts:
Non-gaming verticals (e-commerce, automobile)
Ancillary game dev (visuals, post-launch hosting)
It wants to be the key funnel for creating real-time 3D content (RT3D).
"We expect create to grow faster than operate in 2021"
They're permeating across 2 fronts:
Non-gaming verticals (e-commerce, automobile)
Ancillary game dev (visuals, post-launch hosting)
It wants to be the key funnel for creating real-time 3D content (RT3D).
"We expect create to grow faster than operate in 2021"
11/
13% of 100K custs from non-gaming, vs 8% 2Qs ago
"Forma started w convos w auto mfg abt helping them build car configurators... It was the same thing over and over and over again. So what's enabled it? Simplify it, take the speed bumps out of the way." [on non-gaming inds]
13% of 100K custs from non-gaming, vs 8% 2Qs ago
"Forma started w convos w auto mfg abt helping them build car configurators... It was the same thing over and over and over again. So what's enabled it? Simplify it, take the speed bumps out of the way." [on non-gaming inds]
12/
"The same thing over & over & over" - The use of the engine for Forma to create RT3D really is the key. It can be used to create *anything*
"At Unity, we believe the world is a better place with more creators in it"
"The same thing over & over & over" - The use of the engine for Forma to create RT3D really is the key. It can be used to create *anything*
"At Unity, we believe the world is a better place with more creators in it"
14/
It's cont. focus into making Unity ubiquitous should not be ignored
"What happens in nongaming ... we tell them what we do ... leads to curiosity in the technologist ... already knew how to use Unity ... always a few of them around ... make games on weekends or whatever"
It's cont. focus into making Unity ubiquitous should not be ignored
"What happens in nongaming ... we tell them what we do ... leads to curiosity in the technologist ... already knew how to use Unity ... always a few of them around ... make games on weekends or whatever"
15/
This is quite similar to "land & expand" approaches used by other SaaS companies
With devs becoming key stakeholders, targeting them & enticing with ease of use to gain mindshare in their company & with simplified workflow is always a good sales strategy
This is quite similar to "land & expand" approaches used by other SaaS companies
With devs becoming key stakeholders, targeting them & enticing with ease of use to gain mindshare in their company & with simplified workflow is always a good sales strategy
16/
The anecdotal evidence in 14/ + mkt share in top 1K games + mobile leadership also convinces me that Unity may be chosen over Unreal when non-gaming industries want in on RT3D content creation
Definitely my biased opinion
The anecdotal evidence in 14/ + mkt share in top 1K games + mobile leadership also convinces me that Unity may be chosen over Unreal when non-gaming industries want in on RT3D content creation
Definitely my biased opinion
17/
Game Growth Program
A new service to help bootstrap Indie games to succeed in monetization with "enhanced rev share model"
If the entire game lifecycle is 1 line, Unity is moving closer towards the center (e.g. launch of game) & in doing so add greater value = monetization
Game Growth Program
A new service to help bootstrap Indie games to succeed in monetization with "enhanced rev share model"
If the entire game lifecycle is 1 line, Unity is moving closer towards the center (e.g. launch of game) & in doing so add greater value = monetization
18/
End user engagement tools are also 'pivoted' to non-gaming verticals, which is likely at very little incremental costs
Basically the entire Unity workflow for games can be adapted to that of any non-gaming vertical with only few adjustments? https://twitter.com/JoeyKoh_/status/1329807169210880001?s=20
End user engagement tools are also 'pivoted' to non-gaming verticals, which is likely at very little incremental costs
Basically the entire Unity workflow for games can be adapted to that of any non-gaming vertical with only few adjustments? https://twitter.com/JoeyKoh_/status/1329807169210880001?s=20
19/
Other interesting pts:
"Now with Peter Moore, we see a significant opportunity in the arena of sports and live entertainment"
I note that perhaps Unreal may have a headstart (esp via Fortnite) https://www.unrealengine.com/en-US/industry/broadcast-live-events
Other interesting pts:
"Now with Peter Moore, we see a significant opportunity in the arena of sports and live entertainment"
I note that perhaps Unreal may have a headstart (esp via Fortnite) https://www.unrealengine.com/en-US/industry/broadcast-live-events
20/
"We've hired Marc Whitten from Amazon to lead our create solutions business. Marc is an incredible leader in the world of tech and entertainment. He leads a large GM team in Amazon now. He's also essentially the Founder of Xbox Live"
Likely for continued push to non-gaming?
"We've hired Marc Whitten from Amazon to lead our create solutions business. Marc is an incredible leader in the world of tech and entertainment. He leads a large GM team in Amazon now. He's also essentially the Founder of Xbox Live"
Likely for continued push to non-gaming?
21/
Other interesting posts re $U:
I agree w @trinityalloc & while $U was first developed for games, the core purpose of the engine is to create RT3D content.
Gaming was merely the first vertical. Expect other industries to place more emphasis on RT3D https://twitter.com/trinityalloc/status/1357610621408272385?s=20
Other interesting posts re $U:
I agree w @trinityalloc & while $U was first developed for games, the core purpose of the engine is to create RT3D content.
Gaming was merely the first vertical. Expect other industries to place more emphasis on RT3D https://twitter.com/trinityalloc/status/1357610621408272385?s=20
22/
Good note on $U and potential catalysts for its volatility
@aadhansen Thanks for pointing this out. Did not realise this point. Andreas is also someone I feel knows way more than me on $U, and I often benefit from his tweets. https://twitter.com/aadhansen/status/1357693402754727944?s=20
Good note on $U and potential catalysts for its volatility
@aadhansen Thanks for pointing this out. Did not realise this point. Andreas is also someone I feel knows way more than me on $U, and I often benefit from his tweets. https://twitter.com/aadhansen/status/1357693402754727944?s=20
23/
Summary
While the perception of $U was focused around gaming, we are continuing to see increased developments to non-gaming sides as it broadens its creators to include any and all creators of RT3D content, and that is *alot*
Summary
While the perception of $U was focused around gaming, we are continuing to see increased developments to non-gaming sides as it broadens its creators to include any and all creators of RT3D content, and that is *alot*
24/
We are also beginning to see Unity move up from "Mobile to AA and to AAA with create". Cyberpunk2077 was riddled with bugs - might have catalysed shift from proprietary engine (AAA studios) to Unity / Unreal
We are also beginning to see Unity move up from "Mobile to AA and to AAA with create". Cyberpunk2077 was riddled with bugs - might have catalysed shift from proprietary engine (AAA studios) to Unity / Unreal
25/
More could've been said for rev etc. I think while they have created a great sales funnel (Create -> Operate), the monetization is not showing up as good in financials vs user engagement
Patience is a virtue and all things considered the dip should be bought
More could've been said for rev etc. I think while they have created a great sales funnel (Create -> Operate), the monetization is not showing up as good in financials vs user engagement
Patience is a virtue and all things considered the dip should be bought
26/
LT bullish catalsyts still persist which is
- Democratization of RT3D content creation
- AAA game studios offloading dev to shelf-engines like $U
- Increasing emphasis on AR/VR
- Enveloping entire lifecycle of 3D platform creation & monetizing it
LT bullish catalsyts still persist which is
- Democratization of RT3D content creation
- AAA game studios offloading dev to shelf-engines like $U
- Increasing emphasis on AR/VR
- Enveloping entire lifecycle of 3D platform creation & monetizing it
