In the first quarter of 2025, Unity experienced significant momentum, driven by a culture of execution, reestablished customer trust, and accelerated product innovation. The company surpassed its revenue and adjusted EBITDA guidance by 5% and 29% respectively, showcasing strength in both growth and creation segments.

The migration of Unity's Ad network to the new AI platform, Vector, has been completed ahead of schedule, providing a 15-20% lift in installs and in-app purchases. This enhancement marks a significant milestone in the company's commitment to continuous product innovation and competitive mobile marketplace navigation. Despite the recent Android migration, the focus remains on optimizing user acquisition capabilities and improving AI daily for sustainable revenue growth.

Unity's latest version, Unity 6.1, has seen significant adoption and enhancements, powering growth in gaming and expanding into non-gaming industries with notable customer acquisitions. The platform's capabilities in AR and VR, as well as its success in awards and partnerships, highlight its leading role in the industry.

In Q1 2025, Unity surpassed its guidance, reporting a revenue of $285 million and an adjusted EBITDA of $84 million. The revenue was driven by the accelerated rollout of Unity Vector and a shift towards a high-margin subscription business, now constituting nearly 80% of create revenue. Adjusted EBITDA margins expanded by 200 basis points year-over-year, with improved cost management and operating leverage. Free cash flow improved by $22 million year-over-year, and the company reported an adjusted EPS of 24 cents, focusing on minimizing shareholder dilution and stock comp expense.

Unity successfully priced a $690 million convertible offering in February, using the proceeds to repurchase $688 million of 2026 notes, smoothing its debt maturity profile. For Q2 2025, the company anticipates total revenues of $415-$425 million and adjusted EBITDA of $70-$75 million, driven by improved performance of Unity Vector, despite declines in certain legacy Ad products. The subscription business is expected to maintain momentum across gaming and industry verticals, although Create revenues may see a slight sequential decline due to runoff in non-strategic revenues.

The company discusses the positive impact of the Vector rollout on advertiser spending, noting a significant lift in IIP and increased spending from customers. On the subscription side, strong revenue growth is attributed to the adoption of Unity 6 and a mix of subscriber growth and the effects of prior pricing increases.

The discussion highlights a cautious strategy towards enhancing the Ctor model within the Unity ecosystem, emphasizing thoughtful progression and quarterly guidance adjustments for the remainder of the year.

The Vector launch has been successfully accelerated, positively impacting the business with notable increases in advertiser scale and user quality, leading to higher customer spending.

The company is heavily investing in the vector business to modernize the advertising industry, seeing measurable improvements for customers and remaining confident despite potential macroeconomic challenges. The majority of their customers are game makers, and historically, gaming has been relatively insulated from macroeconomic shifts, further bolstering their position.

An inquiry into the current stage of transitioning to Vector, including details on R&D resourcing and organizational readiness for future growth as of May 08, 2025.

The company is heavily investing in machine learning, including hiring new teams and leadership, increasing GPU and CPU resources, and reorganizing go-to-market teams to focus on both new and legacy ad products. The goal is swift, sharp, long-term growth in the advertising segment, with an emphasis on taking market share both internally and externally.

A discussion occurs regarding the current status of Brentfield at Jeffries on May 8, 2025.

The company recently completed the migration to Vector 1.0, marking the early stages of leveraging their platform's advantages for ad networks and direct customer connections. Strategic focus lies in utilizing these opportunities to enhance margins and efficiency, with cost savings expected from operating a single model instead of two in parallel.

The company started the year with 19% EBITDA margins, focusing on accelerating growth, particularly in the ad business, leveraging Vector's 80% gross margins. Priorities include operational prudence, automation, rationalizing software spend, and strategic headcount management, all aimed at revenue growth acceleration while monitoring profitability.

On May 8, 2025, a participant from Stifel confirms audio quality during a conference call, indicating clear communication.

Despite continued strong double-digit subscription revenue growth, the company sees a decline influenced by the reduction of non-strategic revenue, as seen in the second quarter after a $15 million disclosure in the fourth quarter.

The company has officially transitioned from legacy models to Vector technology as of May 08, 2025, with no specific hard cutoff date previously set. The move to Vector is expected to reduce cloud costs in the latter part of the year.

Participants discuss pressures on iron source, tap joy, and CE products in Q1, anticipating changes in Q2, particularly regarding Vector. They also explore improvements in data flow and Roas as Vector seasons, including potential updates on cross-stats access.

The company is aggressively investing in vector technology, impacting the iads business, and aiming to gain market share from competitors. A major focus starting in the second half of 2025 will be utilizing consumer behavior insights to enhance value for advertising and editor/engine customers, optimizing live services and improving player acquisition efficiency.

The speaker discusses the strategic management of two ad networks, emphasizing the unique value each offers to different customers and genres. Despite the competitive marketplace, the goal is to maximize performance of both networks, catering to varying customer needs and allowing market dynamics to dictate spend distribution.

Despite sunsetting the legacy unity model, the company anticipates stable gross margins and EBITDA performance in the second quarter, with no significant impacts from nonstate GIC revenue changes.

The new vector-powered DSP products have yet to show significant financial impact due to their early stage of launch and ongoing testing by advertisers, despite already demonstrating improved performance and returns.

The company reported $17 million in non-strategic revenue for Q1, with expectations of $30 million for the full year, trailing off after Q1 and constituting under 2% of total revenues.

Subscription revenue grew by 13% year-over-year in the first quarter, driven by success in non-gaming industry segments, new customer wins, and price improvement strategies impacting the P and L.

The majority of revenue in the growth segment is attributed to Unity Vector, which is receiving significant investment due to its size and growth potential. This investment and machine learning advancements are expected to benefit all Unity ad products over time.

The primary focus is on enhancing user acquisition due to its significant short and long-term potential, with mediation considered secondary as the company emphasizes its role as a development platform.

The speaker discusses the encouraging growth and performance of ad spend, noting a significant improvement over prior peak levels. They mention the recent launch of a product that exceeded expectations in performance and emphasize the ongoing learning process in the business. The evaluation period for performance marketing budgets varies among advertisers, with most optimizing for long-term returns.

Despite macroeconomic disruptions, the company's performance and advertiser spend are primarily determined by execution quality and ROI, with increased spend observed as performance improves.