By Senad Karaahmetovic
Shares of Unity Software (NYSE:U) are trading more than 6% lower in pre-market Thursday after the video games maker offered worse-than-expected revenue guidance.
Unity reported earnings per share of $0.03 on revenue of $451 million, beating the consensus for earnings of $0.01 per share on sales of $434.7M. The company reported 1,340 customers who generated over $100,000 in revenue.
"2022 was a highly transformational year for the company. Create Solutions grew our already strong gaming business by increasing our partnerships with existing and new customers. This was complemented with increased momentum with customers in industries (our business beyond gaming) where growth accelerated with digital twins," Unity said in a client note.
For this quarter, Unity said it expects to generate revenue between $470M and $480M while analysts were looking for $524.8M. FQ1 adjusted EBITDA is seen between $7M and $12M. Full-year revenue is seen in the range of $2.05 billion to $2.2B, again below the consensus of $2.22B, while adjusted EBITDA is expected at $265M (up or down $35M).
As expected, the guidance was the main point of discussion among analysts. BofA analysts said the results showed that macro overhang persists.
"We view the company's conservative approach to guidance as prudent given the uncertainty within Grow Solutions end-markets, and believe both topline and EBITDA targets for FY23 can be met comfortably assuming no dramatic worsening of economic conditions," the analysts wrote in a note.
Oppenheimer analysts downgraded shares to Perform from Outperform on macro uncertainty.
"We remain long-term bullish on U's leading positions in mobile gaming and secular proliferation of real-time 3D content to non-gaming verticals. However, visibility is lacking for us to take a more constructive view than what is already reflected in U's current stock price," the analysts said.
Morgan Stanley analysts highlighted "solid Q4 results and more mixed guidance."
"We continue to believe that the in-app advertising market will see material y/y declines in '23 as the main advertisers in this market (i.e. mobile game publishers) remain under pressure. While some third-party data indicates that consumer spending on mobile games may be bottoming from a rate-of-change perspective (more on this here), we still expect y/y declines at the industry level. Put another way, we expect advertisers to have incrementally less to spend promoting their apps in '23 than they did in '22," Cost explained in a client note.