Stock Story -
Game engine maker Unity (NYSE:U) announced better-than-expected results in Q1 CY2024, with revenue down 8% year on year to $460.4 million. It made a GAAP loss of $0.75 per share, down from its loss of $0.53 per share in the same quarter last year.
Is now the time to buy Unity? Find out by reading the original article on StockStory, it's free.
Unity (U) Q1 CY2024 Highlights:
- Revenue: $460.4 million vs analyst estimates of $433.5 million (6.2% beat)
- EPS: -$0.75 vs analyst expectations of -$0.67 (11.5% miss)
- Q2 2024 revenue guidance of $423 million at the midpoint vs. vs analyst estimates of $443.2 million (4.6% miss) (full year revenue guidance also below)
- Gross Margin (GAAP): 68.6%, up from 67.6% in the same quarter last year
- Free Cash Flow was -$14.56 million, down from $60.74 million in the previous quarter
- Market Capitalization: $9.42 billion
Design SoftwareThe demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.
Sales GrowthAs you can see below, Unity's revenue growth has been very strong over the last three years, growing from $234.8 million in Q1 2021 to $460.4 million this quarter.
This quarter, Unity's revenue was down 8% year on year, which might disappointment some shareholders.
Looking ahead, Wall Street was expecting revenue to decline 13.6% over the next 12 months before the earnings results announcement.
Cash Is KingIf you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Unity burned through $14.56 million of cash in Q1 , increasing its cash burn by 25.1% year on year.
Unity has generated $183.7 million in free cash flow over the last 12 months, or 8.6% of revenue. This FCF margin enables it to reinvest in its business without depending on the capital markets.
Key Takeaways from Unity's Q1 Results We were impressed by Unity's strong gross margin improvement this quarter. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, revenue guidance for next quarter and the full year are below expectations. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock is down 3.2% after reporting, trading at $23.4 per share.
