Unity Software Inc (NYSE:U) Reduces Losses

Unity Software Inc (NYSE:U) stock rallies 7.55% (As on August 10, 11:41:53 AM UTC-4, Source: Google Finance) after the company posted mixed result for the second quarter of FY 22. Create delivered another strong quarter with revenue of $121 million, up 66% year over year.  Operate Solutions revenue was $158.5 million, a decrease of 13%; Strategic Partnerships and Other revenue was $17.7 million, a decrease of 2%, each as compared to the second quarter of 2021. Non-GAAP loss from operations was $44.1 million, or 15% of revenue, compared to a non-GAAP loss from operations of $0.7 million, or less than 1% of revenue, in the second quarter of 2021. Dollar-based net expansion rate as of June 30, 2022 was 121% as compared to 142% as of June 30, 2021. Net cash used in operating activities was $42.9 million for the second quarter of 2022, compared to $26.7 million for the same period last year. Free cash flow in the second quarter of 2022 was $(58.3) million, compared to $(33.5) million for the same period last year. Cash, cash equivalents, and restricted cash were $1.2 billion as of June 30, 2022, compared to $1.0 billion as of June 30, 2021.

U in the second quarter of FY 22 has reported the adjusted loss per share of 18 cents, beating the analysts’ estimates for the adjusted loss per share of 21 cents. The company had reported the adjusted revenue growth of 9 percent to $297 million in the second quarter of FY 22, missing the analysts’ estimates for revenue of $299.1 million.

Unity Software Inc. expects Q3 2022 revenue to be in the range of $315-335 million, versus the consensus of $346.9 million. Unity Software Inc. expects FY2022 revenue to be in the range of $1.3-1.35 billion, versus the consensus of $1.36 billion.

Meanwhile, AppLovin has submitted a compelling non-binding proposal to the Board of Directors of Unity Software Inc. to combine AppLovin, a leader in mobile marketing and monetization, with Unity, an industry leading platform for creating and operating interactive, real-time 3D (RT3D) content, in a transaction where each outstanding share of Unity common stock would be exchanged for 1.152 shares of AppLovin Class A voting common stock and 0.314 shares of AppLovin Class C non-voting common stock. Under these terms, current Unity shareholders would receive approximately 55.0% of the outstanding shares of the combined company, with the Class A shares representing approximately 49.0% of the outstanding voting rights of the combined company. Together the combined business would be poised to offer the most comprehensive and fully integrated creation and growth platform for app developers. AppLovin estimates this combination will create over $700 million of Adjusted EBITDA from synergies in 2025E, with a minimum of $500 million in 2024E.

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