Cloud Stocks: Interactive Content Helps Unity’s IPO Soar

Improvements in computational power, greater connectivity and the proliferation of devices like smartphones, PCs, and consoles have led to an explosion of immersive and interactive content. While these trends have helped other app developers as well, it is the gaming industry that has benefited enormously from these factors.

Keeping in mind the growing importance of cloud offerings, last quarter, Unity launched Cloud Content Delivery, a network aimed at simplifying costs, keeping app size down, and providing scale to small and large studios alike. Cloud Content Delivery is an end-to-end solution for storing, managing and deploying content releases. It was built to run cloud-based games as efficiently as possible, while consistently keeping players engaged.

Unity’s Financials

Unity was a privately held company till last September. It had raised $1.3 billion in nine funding rounds from investors including D1 Capital Partners, Light Street Capital, Bienville Capital Sequoia Capital, Canada Pension Plan Investment Board, Silver Lake, Altimeter Capital, and DFJ Growth. Unity went public in September last year when it raised $1.3 billion at a valuation of $13.7 billion and by selling stock at $52 each.

It recently reported its third-quarter results where revenues grew 53.3% to $200.8 million. Adjusted loss was $0.09 per share, surpassing market estimates of a loss of $0.15.

In key metrics, customers that generated more than $100,000 of revenue in the trailing twelve months as of September 2020 grew to 739 compared to 553 recorded a year ago. The dollar-based net expansion rate improved to 144% compared to 132% a year ago.

Unity expects to end the current year with revenues between $752-$756 million. It forecast revenues of $200-$204 million for the current quarter.

Unity’s PaaS Strategy: Platform or API

Developers on the Unity platform can build games and applications that can be deployed and operated across more than 20 platforms, including Windows, Mac, iOS, Android, PlayStation, Xbox, Nintendo Switch, and other augmented and virtual reality platforms. Access to the Unity platform is available on a freemium model. While individuals can access and start building on the platform for free, Unity has multiple tiers for other developers. Access to the platform costs anywhere from $399 per year per seat for companies with revenues or funding of less than $200,000 per year to $200 per month per seat for organizations with larger revenues or funding and bigger seat requirements.

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Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own ...

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