Unity Software Inc.

After the closing of the market today, we issued our shareholder letter. That material is now available on our website at investors.unity.com. Today, I'm joined by Matt Bromberg, our CEO, and by Mark Berry-Smith, our interim 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. And 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. Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A full reconciliation of gap to non-gap is available in our shareholder letter and on the sec.gov website.

Thank you, Daniel. Good afternoon to everyone. On behalf of all the good folks at Unity from around the world, I'd like to thank you very much for joining today's call. When we were together last quarter, we declared an intention to make meaningful change at Unity. We said we wanted to prioritize execution and discipline, to drive more rapid product innovation, and to restore the strong, authentic bond we have with our customers and our community. We've acted on those intentions over the course of the last 90 days in many different ways, and we're feeling the impact of that positive momentum, both inside and outside the company. We started off with the cancellation of the runtime fee. a reversion to a subscription-based model, and introducing price increases that customers could understand. And all this has unblocked our renewals pipeline and reconnected us with our community. We followed that up with the delivery of Unity 6, the best-performing, most stable version of Unity we've ever shipped. Unity 6 marks a fundamental change in how we're going to approach the development cycle going forward. At launch, we introduced a new upgrade philosophy, which... do greatly enhanced testing in real production environments. It's designed to enable customers to take advantage of new features over time with fewer sacrifices to stability. Maintaining a better and more consistent feedback loop will help ensure we deliver tools that make a tangible difference for our customers every day. This combination of a new approach, new pricing, and new software is core to our strategy. When developers choose Unity, they're potentially building a business on top of our platform for decades, and we're dedicated to making that choice easier for them every day. The increases we're seeing in early adoption of Unity 6 are a great indication that this strategy is connecting. We're also really feeling the positive momentum outside of our gaming customer set. Growth has remained strong in industry during Q3, and it remains our fastest-growing subscription business. Key new customer accounts this quarter included KLM, the Dutch airline. They're building a VR cockpit training application. And Deutsche Bahn, the German national rail operator, who've built a series of systems and training simulations in Unity. We also talked last quarter about how we're undertaking a fundamental rebuild of our machine learning stack and data infrastructure. And using AI to enhance the return on investment we're able to deliver to our advertising customers. We're happy to report great progress on that work, which is already in testing on live data. And we're really encouraged by the early results we're seeing. Game monetization will not be a winner-take-all market. I can tell you for certain from personal experience that customers don't desire that outcome. Unity has a unique insight into how to maximize the lifetime value of the gaming consumer. And it's derived from our integral role in both the development and live operations of cross-platform games. The work we're doing to unlock those insights and to improve the gaming industry for developers and consumers alike is what motivates us here at Unity every day. We've also made major strides during the quarter in building out a new leadership team. Attracting leaders with depth of experience to make meaningful, positive change is critically important to continue growth over the long term. At the end of October, we brought on board Steve Collins as our new CTO. Steve brings decades of experience from his tenure as the CTO at King, the studio behind hits like Candy Crush, as well as being the co-founder and CTO of Havoc, the pioneering physics engine that helped define modern gaming. Today, we're equally excited to announce that we've hired a new CFO, Jared Yays, who begins full-time with us on January 1st, 25. Jared joins Unity from Shutterstock. where he has served as CFO for the past five years, helping drive the company's portfolio expansion into 3D content, data monetization, and digital advertising, while also emphasizing revenue growth and profitability. So in summary, we're pleased to be progressing against our transformation strategy while at the same time delivering quarterly results that exceeded the top end of our guidance range. Our vision for Unity is clear. We believe we have a critical role to play in helping drive the game industry forward to its next stage of growth. We're the only company in the world capable of providing a platform to power the entire development cycle, from prototyping through live service management to user acquisition and modernization. This puts us in a position to be able to drive fundamental improvements to the economic calculus of making successful games. On the production side, AI-enhanced tools will speed the development process and enable greater innovation. While in live operations, advertising and monetization will be able to provide insights that customers won't be able to get anywhere else. We see every one of the 3 billion monthly downloads of a Made with Unity product as another opportunity to provide value back to the users who are enjoying the product and to our customers who are creating that product. We'll have much more to say about all this as the work continues. Our team is aligned and energized to fulfill this vision while also focused really hard on continuing to improve our business every day. I'll turn the call over now to our interim CFO, Mark Barry-Smith, for an overview of our financial performance. Before I do, I'd like to thank him very much for his work over the last 90 days or so as we prepare to welcome our new CFO to Unity in the new year. Mark?

Thanks, Matt. We are pleased with our third quarter results that exceeded guidance for both revenue and adjusted EBITDA. In Q3, revenue from our strategic portfolio was $429 million, down 2% year over year and up 1% sequentially from Q2. This compares favorably to our guidance of $415 to $420 million. Third quarter create solutions revenue from our strategic portfolio was 132 million, up 5% year over year, and up 2% quarter over quarter, driven by growth in our subscription revenue, which was up 12% year over year. Growth solutions revenue from our strategic portfolio in the third quarter was 298 million, down 5% year over year, and up 1% quarter over quarter, expanding on the sequential growth we saw in Q2. Adjusted EBITDA for the total company for the third quarter was 92 million, compared to guidance of 75 to 80 million. We delivered 115 million in free cash flow in the third quarter, up 11% from 104 million in the prior year, Cash and cash equivalents at the end of the quarter were 1.4 billion. With that, let me turn to guidance. We are raising guidance for the full year for our strategic portfolio to 1,703,000 to 1,708,000 compared to 1,680,000 to 1,690,000 previously. and adjusted EBITDA of $363 to $368 million compared to $340 to $350 million previously. This translates to Q4 guidance of $422 to $427 million, and Q4 adjusted EBITDA of $79 to $84 million for the total company. The Q4 guide reflects continued caution on the timing of the revenue recovery in our grow business, as well as expectations of some additional compute cost associated with the training of our new machine learning models. With that, let me turn the call to Daniel so that we may take your questions.