Many companies have made public their Q3 earnings report to showcase their financial performance in the three months ended September 30, 2023. Unity announced a revenue of $544 million (a 69% year-over-year spike). However, another piece of information contained in the earnings report was the possibility of layoffs.
Instead of providing guidance to stakeholders on what they should expect from the company in the next quarter and beyond, the company revealed in that section that they were planning structural changes.
“Several weeks ago, we started a comprehensive assessment of our product portfolio to focus on those products that are most valuable to our customers,” the company said. “We are evaluating the right cost structure that aligns with the more focused portfolio. We are acting quickly and expect to make final decisions over the next few weeks… expect to start implementing the plan within this quarter… to complete all interventions before the end of the first quarter of 2024.”
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Unity’s revenue spike was also accompanied by a lower net loss record of $125 million compared to $250 million during the same period last year. The company’s Grow Solutions revenue also spiked by 166% year-on-year to $355 million. However, their Create Solutions revenue remained flat year-on-year at $189 million.
“This will likely include discontinuing certain product offerings, reducing our workforce, and reducing our office footprint. The exact timing of these interventions is difficult to estimate. We are therefore not providing guidance for the fourth quarter or the full year 2023.”
Unity’s guideline will come with the “fourth quarter and full year 2023 results”. In addition to the guidance, the company promised to share “more details on our operational interventions” with the full year 2023 report.
Unity wants to accelerate revenue growth
Unity has made a couple of changes in recent months after a fallout with developers following an unexpected fee review. Last month, the company announced that John Riccitiello would be stepping down as the president, CEO, chairman, and board member immediately.
After the outcry, from developers, Unity partially reverted their policies. The earnings report began with an introduction by James Whitehurst, Unity’s interim CEO and President, who emphasized the need to restructure the company.
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“We have a significant opportunity to accelerate revenue growth, improve profitability metrics, and increase free cash flow generation going forward,” wrote the Unity interim CEO. “However, we are currently doing too much, we are not achieving the synergies that exist across our portfolio, and we are not executing to our full potential.
Whitehurst hopes to “address these opportunities” gaps to make Unity a “leaner, more agile, and faster-growing company”. Whitehurst said more details will be shared in the coming months. The mention of “leaner” in the CEO’s introduction further points to the fact that layoffs are inevitable.
“Going forward, we plan to increase our focus on our core; the Unity Editor and Runtime, and Monetization Solutions as we continue to see significant opportunities for growth in these businesses, including AI. In addition, we aim to sharpen our focus on fewer larger and more attractive businesses where our capabilities offer a clear competitive advantage like Digital Twins.”
James Whitehurst, Unity’s interim CEO
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Further corroborating Unity’s restructuring plans was Luis Visoso, the company’s CFO. Visoso mentioned that Unity’s restructuring plans are urgent and would be implemented this quarter with the plan of finalizing by Q4.
“It’s not like a business model transition that takes a year or two years to complete,” Visoso said according to a transcription by Seeking Alpha. “These are things we were planning to do and executing now.”
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