Q4 2022 Unity Software Inc Earnings Call

Being strong.

Speaker 1: well, we're seeing strong DA use or users in our network, suggestive of overall gameplay that remains strong. And then within the industry side, where we've reported over 100% growth last year in digital twins, there's very, continues to be very robust demand.

Speaker 1: And so, you know, maybe some elongated sales cycles where people take a little bit longer to decide, but we've got demand far in excess of our ability to supply. We're in a pretty good spot and we're not feeling a pinch. So all in the market seems stronger and I'd offer that then you might expect, especially when we're indexing against such unusual years, you know, the work from home or learn from home era, but a couple very specific points. The ads market is stabilized as of the middle of 2022 and continues to be stable now. What's actually happening is strong user engagement offset by weaker eCPMs and we historically see, but again, it's been stable. At some point that flips and we're not expecting it to fit, we're using that in our models looking forward. We wanna be conservative, but all in the markets are solid.

Speaker 1: There's not a lot of concern here. Great. Thanks very much. In the ways, you know, this question that we get oftentimes for you would be, you know, how are you thinking about balancing growth and profitability and kind of how does that fit into the guidance that we issued today? Yeah, thank you, Richard. So what I would say is on the revenue side, just like John just mentioned, we're taking a prudent assumption on the market. And that is reflected in our revenue guide. It is clearly better to plan this way in this environment. Now on the coast side, we're taking very clear actions to improve profitability. And this includes things like the elimination of close to 300 roles that we announced before being very selective in any future new hires that we add to the company, being more focused in our investments and reducing the number of beds that we make in the in at unity, raising the bar on cost. And we've been turning every stone once or twice and finding new opportunities in a few places. And, and that frankly includes reducing the number of shares that we grant as part of compensation. So we're taking a very holistic view on cost.

Speaker 1: and making sure that costs are adding value. And as a result, you should expect to see costs relatively flat during the year as revenue grows quarter over quarter. Now, what happens then is that we expect to significantly improve profitability in 2023. If you look at, we had a loss of $90 million non-GAAP in 2022, and we expect adjusted EBITDA to be about, you know, somewhere in the range of $230 to $300 million in 2023. So very significant swing from one year to another. Now, what's interesting is in 2022, we were only profitable in Q4. In 2023, we expect obviously to be profitable every single quarter. And one more point I would like to make is that the profitability improvement that you see year over year comes about 50-50 from create and grow. So we're making progress across the board. We're taking, as Juan said, more conservative assumptions on the market and being very proactive on costs with decisive actions to improve profitability in this environment.

Speaker 1: Great. Thank you very much. Well, now we can open it up to questions from the analysts on the call. As before, what you need to do is raise your virtual hand, and we'll answer questions until we run out, and we appreciate your interest. There we go. First question from Matt Cost at Morgan Stanley . Hi everybody. Can you hear me? Yes. Yes. Great. Thanks for taking the question. Maybe just one thing in the letter, you mentioned the drivers of create revenue growth being pricing, China, and digital twins. Should we assume that that seat growth is going to be under pressure or stable this year because of some of the issues going on in your customer base in the mobile gaming market? That's the first question. The second question is just when we look at the ramp in EBITDA, I think the guidance for the first quarter is 7-12 million, the full year number is 230-300. That's a pretty significant step up in just dollars of EBITDA.

Speaker 1: professional artistry is and you can we can talk a little bit more about that, but you know how tools like Weta and Zeva and the things that we've we've acquired are coming to market in the coming year and with that you know new customers new seats etc. So we don't feel like there's any issue around the seats side. It's really we're calling out particular growth drivers.

Speaker 1: Great, thank you. And Jason Bazinet from Citi. I just had a simple question. Just maybe this is for Luis. Sequentially, new create grew about $9 million and I think old create grew about $13 million.

Speaker 1: which implies either strategic partnerships or UGS maybe contracted a bit. Is there anything that is noteworthy there or anything that you'd call out? Yeah, Jason, good point. And you may remember in Q3, we had a very strong strategic partnerships business. We actually commented on this call.

Speaker 1: And that is a business that will have ups and downs just based on when deals are signed. So that's why I think it's super important to look at the create numbers on a standalone basis where you actually see, as you just mentioned, an acceleration from Q3 to Q4 in terms of number of dollars added Q over Q. Okay. So that's the way I would think about it, Jason. Just take the, that's the view, the clean view apples to apples. Okay. And do you mind if I ask one follow up? It just seems like the tensions with China, whether it's them sort of advising not to use the big four accounting firms or some of the changes that we made related to

Speaker 1: chip exports are sort of increasing. And I know China isn't the biggest business geographically for you, but is that a concern investors should have, or do you think it's sort of ring fence to chip manufacturing and big four accounting firms? Let me take the top of that one, Luis. Yep. So China is the biggest gaming market in the world. So let's just start with that. The second thing, we're the market leader in China in the businesses we operate there. So super, it is important to us. Apologies getting over cold guys, but third observation to make for you, we have made a change in our structure in China that we think better, if you will, sets us up for long-term growth in China versus the structure we had previously. Luis can get to that in a minute. But fourth, China after, I don't know, nearly a year and a half, not issuing new licenses, it started to issue licenses again. And then lastly, we're seeing a lot of interest and demand on digital twins. So to us, China is important and we've set ourselves up for long-term growth there. Great, I think the next call should be from Goldman Sachs. Are you guys on?

Speaker 1: gain market share in Q1 and throughout the year, which is why we were confident in predicting growth for the business for the year. It's essentially what we're trying to say is we're saying, starting in the middle of last year, a stable market for the advertising business. We do expect that to pick up at some point. Luis and I made a hard call a while back to say, no matter what anybody tells us, we're not gonna predict a recovery in 2023, even though there's a fair amount of folks that would argue there should be by the end of this year. We've chosen not to do that because it enables us to put a stronger focus on cost and get the EBIT leverage that comes from that.

Speaker 1: So within that stable market, we're predicting market share growth and we're seeing it already in the marketplace. And we expect to see that throughout the year. So all in all, the integration, iron source, energy is going well. Is an example, we haven't lost a single executive that is typically not the case in these things. And so, you know, there's a lot of work that Comer on the growth side and Mark on the Creator side are working to drive synergies between the platform.

Speaker 1: in terms of how we go to market and how we bring customers onto our platform. We think that's gonna pay a lot of dividends over time. The word synergy, you guys are gonna get sick of it over the next several quarters as we talk about how we're generating better outcomes for our customers and better outcomes for us as a combination of a singular end to end platform. We talked about that in the shareholder letter. It's going to be a theme song for us because we got exactly what we were looking for. If you will, a hand in glove combination of tools and services that make the entire platform much stronger than just the additive combination of the two businesses. So market share growth through the year, heavy emphasis on synergy going forward. And with that, the EBIT levers that Louise talks about.

Speaker 1: Couple of colors. And just one quick follow up for Luis here. If I look at the net retention number, X iron source, it down ticked a little bit this quarter versus last quarter. What do you view baked into the 2023 out with either on a combined basis or an X iron source basis? Just trying to think through what's contemplated from a net retention perspective in the guide. Yeah. And now you want me to guide on the expansion rate. So Brent. You always want more Luis. I think overall, I just repeat what John just said, which is we are expecting to expand market share both in Q1 and Q2. Now what that would imply to me, Brent, is we should be seeing net expansion rate above 100% clearly for every year.

Speaker 1: I don't want to give you a precise number and test, you know, with and without our own source. But yeah, that's what it implies. Now we expect to grow market share both in Q1 and for the year. And therefore, we should be seeing a positive number in that expansion rate. Helpful color. Thank you so much. Thanks, Brent. Great. We should have, there we go, Gilly for cash. I see you there. Goldman Sachs, you guys ready? Okay, well, do we have, Thomas, do we have other people on the.

Speaker 1: There we go. Dylan Becker at William Blair, please. Awesome. Hey, hopefully you guys can hear me. Maybe Jon's starting off, I think there was an announcement not too long ago, and we spent a good bit of time talking about what live and interactive games can look like for the industry, but how important is that partnership you guys announced with Google in expanding the opportunity for UGS and maybe the ability to improve monetization for developers looking to capitalize there? Well, look, I'd say that Google's one of our best partners. So we partner with them on a number front, as we do with a number of the major mega caps. So we're deeply partnered there and it's super important to us. The second thing is we have massive faith in the long-term growth prospects for UGS. And it is, in the fullness of time, it is gonna be a very major business for us. And it's already a substantial business for us. So it's an area where we're focused on for growth. We've got a really strong general management team. That's Jeff under Mark. And they're driving it for growth right now.

Speaker 1: We're working on bringing more customers onto the platform and we feel good about the offering. It is a very competitive offering in terms of high performance at a good cost equation for our customers. Super helpful. Maybe if we can talk on, and we haven't spent a ton of time on the Aura piece of the business as well, maybe some near terms advice headwinds there, but how do you guys think about the opportunity for global connectivity going forward and potential monetization opportunity and touch points being afforded by being embedded across a lot of a significant number of those devices as well? Thanks. For those of you who don't know, it's a very strategic business for us. It came along with the IronSource acquisition. It's a device management business. They operate at the carrier level, but around the app store. And it's a business where we drive a great deal of data, but we also drive meaningful revenue from it. Our offering we believe is well differentiated from the principal competitor in the space digital turbine. And it's another area where we can't get too specific because when we talk about winning market share, it's like winning a major national carrier. So these fields are not like you pick up a half a point a day.

Speaker 1: these are, or half a point a quarter, these are material traits. And we are confident that we're gaining here. We have been prior to Unity's ownership and we expect to going forward. I would love to share you what our pipeline looks like. It would make you happy, I think, to hear what our pipeline looks like, but it's something I can't get into further detail on, but we feel really good about that business. If you think about, if you're Unity, we love, if you take, for example, a mobile ecosystem, we love that we're the leading platform for creation on both the app stores. We love that we're one of the leading monetization user acquisition platform across the entire industry. We love that we've got a meaningful device management, those same devices. We love that these things come together to create an end-to-end platform that makes what our customers do more successful when they use our platform. It's that end-to-end highly synergistic platform that differentiates Unity from anyone and from everyone. And we feel really good about our ability to bring all that together synergistically and again.

Speaker 1: an important driver of the EBIT performance we're going to see through the year. That added market share and that added pair of wallet yields a more profitable unity. Now..

Speaker 1: It's happening precisely right after the acquisition because what we're carrying to market is a message. And the message is the power of the combined data platform, the power that drives a better performance for our customers. Now, these are things that are, if you will, that they come about as a result of a presentation.

Speaker 1: Now, the second thing we're doing now is we're engineering in, for example, Supersonic Indoor Editor to make it an easy platform for our customers to take their products directly to market without ever leaving the environment. There's a lot of places where the tool set, whether it's Luna or it's Supersonic, or it's parts of Levelplay and the integration of where it shows up into the mix, where our customers are going to take advantage of a more performant platform for them to create, to publish, user acquire, or monetize directly. And there's some things we can do there, which is more about engineering in, and that's what we're working on right now. That combination of we're a better story, they want to be part of something that's bigger and better, is the starting point. The second point is to engineer in the advantages that our customers need and want. And it's more than just Supersonic and Levelplay, it's the two networks, Iron Force, etc. Also, all of the create tools, for example, whether it's...

Speaker 1: artistry as we bring AI to the equation, as we bring simulation to the equation, things that they need for better content creation, more cost efficient content creation. And so it's UGS, which is part of the platform, which is what's enabled us to find success in that space. So really what it's about, and I hate to wax on about synergy. Synergy is partly about the story, but it's more about engineering a simpler single source of truth, single source of opportunity, single platform for our customers to leverage to find a more successful business for themselves. As I said, we'll be talking about this each and every quarter for probably years to come. Great. Okay. Well, I'll mispronounce your name or Singe from Wolf, but please ask your question. Thank you so much. Hi, can you guys hear me? Yeah. Hi, this is Arseni Onfurgal. Thanks for taking my question. I wanted to ask whether you could parse out roughly what the growth of non-gaming create was excluding Weta and UGS in 4Q. And then I had a quick follow-up. Luis, you have that? Yeah. We're not providing it by quarter. We put in the node, you see very strong growth, no, 118% is the exact number for the year.

Speaker 1: For non-gaming, that includes the weather growth, which we isolated before. We told you at the beginning of the year that would be about $70 million. The other thing that you saw is an increase as a percentage of our business. Now, on a comparable basis, we went from 40% that we announced six months ago to about 41%. So that would be on a comparable basis based on the old structure that we've been reporting before. So we're clearly seeing an acceleration in that business, and we expect that to continue into 2023. Thank you, that's helpful. And then just quickly on one of the metrics in terms of customers over 100K and the contribution from IronSource, I believe that the last published number for IronSource for customers contributing over 100K was 446, and that number is now 284, backing that out. Is that just due to the revenue recognition from IronSource due to the timing of the acquisition, or was there some kind of churn that happened in IronSource relative to what they last published in Q22, thank you. No, it's not that. What happens is, obviously, some of the larger customers were also large customers for us, so you cannot just add the numbers. So some customers just became even larger for us, but they were already counted in our customers above $100,000, you see that?

Speaker 1: Yep, perfect. Thank you. Make sense, which is a good combination, right? Because basically what it does is we acquire new customers, which is terrific But we also penetrated some customers even more which is also very helpful. So we had a healthy combination of both Perfect. Thank you very much Right we have any other questions from folks in the audience Not Mario from Barclays Hey guys, thanks for taking a question. I just have one on the seasonality of the joint business now In terms of you know, what we saw in the fourth quarter you guys said it was 518 on the combined financials versus the guidance of 1Q475. So just curious Is that sequential step down mostly from the create side of the business or is it on the growth segment? Thanks

Speaker 1: Yeah, do you want me to take that, John ? Yeah. So Mario, it's very difficult to talk about seasonality over the last few years, given all the factors that John explained, right? I mean, COVID, the economy, I mean, just name it. But to answer your question, yes, we are taking a prudent view on the market and it's for both businesses, but particularly for the growth business. That's where we are being even more conservative on the business. I don't wanna give you a forecast for each of them for Q1, but yeah, we are being prudent there on the assumptions in the market. You will see normally in Q4 kind of a strong professional services business. So that will be one thing to always watch in Q4.

Speaker 1: And then seasonality driven by the other factors that we mentioned. So that's the way to think about it, Mario. It's seasonality right now just in terms of speaking to it. Is I've continued to say today that we've seen stabilization and the ads business starting in the middle of last year. The beginning of last year was exceptionally strong. We had the second wave of COVID, people returned home or went home from school. And we had very elevated Q1s in the industry. And so it's very hard to reach seasonality in a normal year. You'd say across the growth side of the business Q4 is the strongest quarter. Q1 is the second strongest quarter, essentially staying a little bit elevated after the Christmas holidays. And then a little bit of growth as you go to Q2 to Q3. So it's really hard to reach seasonality in the middle of last year. So it's very hard to reach seasonality in the middle of last year. And then a little bit of growth as you go to Q1, which is the strongest quarter, which is the strongest quarter,

Speaker 1: And then within the game side of the business, you'd say it's a business that is similar with Q4 as the strongest, although in mobile it tends to be more even, but there is increased consumption in the fourth quarter. That's been true for many, many years. And then through this fairly subtle world of seasonality, where the fourth quarter can be 10 and 15% higher than the third quarter, that type of outcome, what we did is we drove a truck through it, like three different ways. COVID, work from home, issues around a recession. And so it's been very hard to read the underlying signal. And again, which is why we're emphasizing right now, what we're seeing is really strong consumer engagement in games, really strong pipeline outside of games and create. Stabilization in the ads business based on strong consumer engagement and slightly weaker eCPMs, which is typical.

Speaker 1: of a recessionary period around which you some, you recover at some point. So we've been trying to give you as much of that understanding as we can. We see a lot of data, we model the heck out of it, and we understand it, we think pretty darn well. But it is definitely a challenging time to sort of be an econometrics type person in this space. Great, that's very helpful. Maybe just a quick follow up. In terms of the commentary, you know, of the game as market being approximately down 10% this year, year and year. You know, that's, you know, some other companies are saying it's stabilizing to improving, but is your point just the first half is just a very tough call? So precisely, you've got that right. So we've added more color than others. Yes, it's stabilized from middle of last year.

Speaker 1: The beginning of last year was exceptionally strong. And so the market in the first quarter of last year was up in the mid 20s in terms of growth, in terms of sort of served advertising business in the first quarter across the industry. So when we're looking at stabilization from the middle of last year, what it is in the first half of 2023 was we're lapping a stronger period. Even though it's stable, we're lapping a stronger period. In the second half of this year, we're not forecasting recovery. We're now going to be comparing to the second half of 2022, which was flatter. It wasn't as strong. And so we're going to get, if you want to think about it, the first half of the year, call it down. And the second half of the year, call it flat. So that's where we get the minus 10 in aggregate if you're modeling the whole year. We're saying exactly the same thing. The market is stabilized. We're adding the added color.

Speaker 1: that the year over year indexes for total serve gaps will be down in the first and second quarter. Yeah. Thank you. You're versus the quarter of a quarter of you, Maria. Yep. Sorry. I'll fold. Thank you guys. Hey, Parker Lane. Great. Thanks for taking the question, guys. Louis circling back to net expansion rates for moment. I was wondering if you can give us a qualitative sense of how grow is compared to create recently. And then if I look at the non-gaming segments, in particular, what impact and future impact you expect from the introduction of new pricing initiatives and perhaps consumption models on the non-gaming side? How much of a tailwind can that be to expansion going forward? Yeah. So if I look at the create side, the net expansion rate has been fairly stable and very healthy. Right? So the reductions that you've seen over the last two quarters have gone mainly from the growth side.

Speaker 1: So it may seem counterintuitive that we increase price loss here in the game sector, but we expect that to drive sequential quarter to quarter growth through 2023.

Speaker 1: We honor existing contracts at the price that the existing contracts were signed. So as existing contracts reach their termination date and we renew our customers, they renew at a higher price. So pricing is one of the things that's driving growth for us this year, despite the fact that pricing was taken last year, because of when our customers come on to it.

Speaker 1: Second thing, and I think it was in the third quarter call, I framed up our digital twin platform, which at that point has just gone into general availability. What that is, is it's a ratable U-space platform.

Speaker 1: for our digital twins. And we've got lots of customers coming onto that. And that is incremental, routable revenue that we expect is gonna be a major business for us in the quarters and years to come. So there's additive in that way too. So that's, I hope that gets to a little bit of what you were asking, a little more insight.

Speaker 1: Thanks for the color, guys. Appreciate it. Okay. Steven Joo over at Credit Suisse. All right. Thank you. So I was wondering if you can give us the latest in terms of expectations on the timeline for the productization of Weta. I guess, you know, video gaming, I guess media sectors will probably be the first adopters, but you know, which additional sectors can you see that you can onboard here who you might not have seen before? And you know, also directionally, I think this is a product that's had a client base of one. So, you know, from a pricing perspective, go to market sales motion, if you can just add a little bit there, maybe it's a little bit too early to talk about that now, but just sort of initial sort of commentary that you might be able to offer as you think about going to market with what will be a productized Weta. Thanks. So I can take part of that, Luis, you might want to add. But when we're talking about productizing for professional artistry, we mean more than just Weta, although Weta is obviously the substantial portion of it, but also the tools like Ziva and Speedry add to our portfolio of professional artistry.

Speaker 1: Second point, there's a number of the products that we've been talking about, Mark talked about a couple calls ago, within the wet-up portfolio that we are commercializing this year. And we're already in customer conversations. The most interest right now is a combination of the film industry and the game industry. Big surprise, it's where you'd expect it to be. What I won't do through on this call is in conversations that are in flight to close around those products this year to tell you who we're talking to, but it's the likely success that suspects that you would expect. But we don't pre-announce deals that we're now in the process of negotiating. But we see at least according to our own internal plan, we're tracking well. The products are coming to commercial opportunity and the time frame we'd anticipated if not a tad bit earlier. And we're finding good interests in the primary markets that we had anticipated. So in a word, I'd say, or an absurd sentence. It's going as we anticipated when we made the announcement around what and we announced to acquire them. And it feels good to us right now. Luis, we do want to add anything? No, I would just say, John , that it's 100% consistent with what we said before. We would take us two years.

Speaker 1: comes in. You know, you and iron source both are very heavily into the gaming sector. You have a lot of non-gaming businesses on the create side. I guess iron source is mainly gaming, but are there opportunities now to expand your ad tech services given the broader client base that you can offer, as well as what Aura could bring in given the other sectors that it touches? We first have to get credit for a 12-part question. So, we'll do our best to remember it all as we respond. That's the first one to get out of the way is the data issue was out of the way before.

Speaker 1: We completed our merger, in fact, before we announced it. So that was in the rear view mirror. The second thing on integration, we've already largely integrated teams. And so Omer, by way of example, is essentially the chief revenue officer for Gril. And so we consolidated two sales organizations under him. He's providing able leadership. We also consolidated products and engineering under Ingrid and Eyal on that team. So we brought teams together to achieve singular focus on delivering the right outcomes for our customers. These are the engineering teams are working together. The product teams are working together. The sales teams are working together. In terms of engineering and data, we've already accomplished essentially the primary data merge. So that can yield better outcomes for our customers there, because essentially more data around the same questions or on user acquisition yields a better outcome for our customers. So we've achieved that. That's part of what we've already done. And we're now starting to see situations where we're applying a tool that might've been a Unity ad network to the iron source network or.

Speaker 1: a practice or an approach technically that was in the iron source network to the unity network. I won't get into the specifics of that because first off it would take me five minutes to define most of what these tools do. And that seems like an unnecessary way into this conversation, but just this morning I was going through one tool in particular that we expect to have a favorable outcome for our combined ad network based on bringing a tool from one side of the equation to the other side of the equation. And then beyond that create to grow they're doing the exact thing at a higher level. So that's happening. Aura, you talk about Aura relative to non-gaming. For those of you that don't know, part of what Aura does is it drives installs of game and non-game applications on Android devices around the world based on carrier relationships. That essentially puts us in the ads business outside of gaming. And I believe you're absolutely right to point out that driving installs outside of gaming represents a significant opportunity for unity. And some of those are gonna be our create customers but that is something that we don't have a specific plan for today, although we've certainly talked about it. So we've been focusing on the very obvious and most important synergies for that end to end platform.

Speaker 1: And there's a few things that are sort of next quarter's conversation and that particular one is more of next quarter's conversation internally to Unity. Excellent. Thanks for that. Okay. I'm going to try to slip in two more and finish up. So first we'll start with Jonathan and then we'll conclude with Franco. Great. Can you hear me? Yep. Yep. Great. So let me get in here and ask my questions. Actually most of them have already been answered. Just wanted to ask then the rationale behind combining strategic partnerships into create. I mean, it would make sense that you would have, you know, create, add some of the stuff from operate and operate would become grow, but why would you not leave strategic partnerships separate like you have before? Thanks.

Speaker 1: The majority of the revenue is very create centric. Pretty simple. These are often deals where revenue is derived from a platform holder to enable create, to work better for their platform. So it was more pattern matching here. It was like this is very much like a create business. We'd held it out separately because it had a different sales cadence and a very different type of deal structure. But when we tried to figure out where to put all the different pieces post merger, this was the obvious place for it. Luis, you might want to add to that. Yeah, I totally agree, John . We manage the teams together and that's because of the synergies, because one drives the other. So we thought that would be the most natural thing to do, Jonathan, but will be transparent as I was at the beginning of this call on where we see volatility driven by strategic partnerships that we need to call out. Okay, great. Thank you.

Speaker 1: All right, not the least, not the last. Franco, why don't you tee it up for finishes up? Yeah, John , so on level play, you talked about what the sure can't you have and you're rightfully noted the variability in delete times. Can you speak to whether this is from developers that are new to the market or are you leveraging the relationships on the iron source side and getting someone that is perhaps a bigger scale, more mature players. And I guess what is your strategy to game business from some of the large publishers that are?

Speaker 1: currently in other platforms. For some reason that broke up a lot for me on my end of hearing that. There's like half the words. Richard, you kept the question and can summarize it back. Frank, why don't you summarize again because I lost the same thing, so. Okay, well, I need to get a new headset. The question was really around level play. Are the customers brand new to the market or are they more mature, bigger in scale? And what is the strategy to gain big publishers from other platforms? So what is the strategy for other platforms relative to love of life?

Speaker 1: Again, I'm not fully rocking your question, so I apologize if I don't answer it correctly. But I'd mentioned a couple of things. One is that prior to the merger, you could argue that level play was more richly successful with smaller, more independent players, and Unity had relative strengths with the larger players. What we're now doing is closing more of the larger players. So that feels like somewhat of a synergy with level play. If you're thinking about the synergy of create to level play, integrating level play into Unity as a winning strategy, because remember 70 odd percent of mobile games are built in Unity. That's a very obvious thing to do. It was very evident at one of their launch events last year in September , I was there speaking to.

Speaker 1: many hundreds of levels like customers. And one of the things I've never done is that how many of you are unruly customers. And it turned out when I asked for Shoah hands, 100% of them in the room were unruly customers. And so there's big synergy in that direction as well, because they all weren't yet level-like customers. They were there shopping at level-like, but they were all already unruly customers. So does that get to what you were asking me about though? Because again, we might have a network issue here. I got a bit of a garbled version of your question. Yeah, no worries. I could take it offline. I appreciate it. I think Franco, if your question is, why do we expect level-blade to grow market shares? Frankly, we believe that it's the best...

Speaker 1: All right, we catch the thing at the end from the top of double black diamond slope. So you can catch it. Thank you so much. Wouldn't really call for anything. Thanks so much. I can rest on the corner. John , as you take a step back now your index to the opposite reason better.

Speaker 1: You're a little bit over indexed to the pick up in the advertising markets through the acquisition of iron source And you're also indexed to what's going on the create side with digital twins How should we think about how you as CEO are prioritizing your investments? So you get the best bang for the buck in each of these markets depending upon their relative importance and What that could mean for what really drives unity in the future. Thank you

Speaker 1: Well, first off, if you want to know what drives me as a CEO to its prioritization, it's this company, it's a very rich conversation between Luis and May and the principal C-level officers looking at the opportunity in front of us. Now one of the things that we're frustrating is we've shifted from a go-go market to a tough recessionary environment and the market correction that's taking place is there there were programs that we liked in a different economic environment that are no longer funded. An example of that is, you know, what we were doing with sports and live entertainment. It's a beautiful technology that customers want, but we depriarized that in a different economic environment and there were several other things that we did that were like that. Now we didn't deprioritize what off because there's already a meaningful revenue stream there and there's a meaningful and a very great opportunity for that around professional artistry to grow a bigger and better business.

Speaker 1: And remember, most creators in the world are not coders, they're artists. They want those artists tools. So that made the cut for us. But in general, I would tell you that if you look at our two businesses, right, Create and Grow. Grow is a business where the engineering cycles for product development are typically inside a couple of quarters and certainly inside of a year. Many times on the Create side, the creation cycle for meaningful new technology can be multiple years, certainly multiple quarters. So for example, when we created the digital twin platform that will allow us to generate ratable revenue, cloud-based revenue for digital twins, that was 18 months in process. And so we have to look at them through a different lens in terms of ROI timeframe.

Speaker 1: Now, the reason we invested in the cloud platform for Digital Twins and a very similar thing around UGS for games is because we believe in the fullness of time. The best way to drive revenue or unity on create is through the addition of a ratable revenue streams based on usage. We're already paid by the seat for people creating things. We were looking for a second revenue stream and in solving a major problem for our customers. And so when we look at our businesses today, things like level play and our ad networks are profitable, our core games businesses, a lot of things are very profitable for us. Some remain that investment and we

Speaker 1: We prioritize them based on what we believe to be strong ROI thresholds. Now, personally, I'm from the gaming industry. I've spent decades in the gaming industry. I am intellectually in love with digital twins. I'm emotionally connected to games. But our resource allocation isn't based on emotion. It's based on math. And we look hard at it in this environment to make sure we're making the right investments for the right ROI. Which is how and why we're reporting even with modest revenue growth, really strong profit growth here over here. We think that's important. We prioritize that and we're going to deliver that.

Speaker 1: All right. Well, thank you so much. We got done a little bit late, but that was pretty quick and efficient. Thank you all, and we'll hope to see you on the road or at various conferences. Thanks a lot. The recording has stopped.