The company hopes to get close to a billion in revenue for 2021.

Unity had a pretty good Covid year. The company went private in September 2020. The share price surged 30% over its IPO price giving it a value of $20 billion. The company raised more than $1.3 billion in the IPO.

In its annual report for 2020, Unity says they’ve had record results, which is sort of an obvious statement. First of all, 2020 was a record year for everyone, sometimes good; sometimes bad. Second of all, they went public. But yes, the company did also significantly changed its trajectory.

Getting down to numbers, the company reported $220.3 million in revenue for the 4^th quarter giving it a 39% increase year over year. For the year, the company made $772.4 million, a 43% increase over 2019. The company says they’re projecting revenues of $950–$970 million for 2021.

Here are a few bullet points for the quarter:

• Revenue was $220.3 million, an increase of 39% from the fourth quarter of 2019.
• Create Solutions, Operate Solutions, and Strategic Partnerships and Other revenue was $66.9 million, $134.3 million, and $19.1 million, respectively, an increase (decrease) of 39%, 55%, and (19)%, respectively, from the fourth quarter of 2019.
• Loss from operations was $80.8 million, or 37% of revenue, compared to loss from operations of $48.6 million, or 31% of revenue, in the fourth quarter of 2019. Our fourth quarter 2020 results were impacted by an increase in stock-based compensation expense.
• 793 customers each generated more than $100,000 of revenue in the trailing 12 months as of December 31, 2020, compared to 600 as of December 31, 2019.
• Net cash provided by operating activities was $14.8 million for the fourth quarter of 2020, compared to net cash provided by operating activities of $0.9 million for the same period last year. Free cash flow in the fourth quarter of 2020 was $3.6 million, compared to $(9.7) million for the same period last year. Cash, cash equivalents, and restricted cash were $1.3 billion as of December 31, 2020 compared to $0.1 billion as of December 31, 2019.

And for the year:

• Revenue was $772.4 million, an increase of 43% from 2019.
• Create Solutions, Operate Solutions, and Strategic Partnerships and Other revenue was $231.3 million, $471.2 million, and $70.0 million, respectively, an increase (decrease) of 37%, 61%, and (12)%, respectively, from 2019.
• Loss from operations was $274.8 million, or 36% of revenue, compared to loss from operations of $150.7 million, or 28% of revenue, in 2019. Our 2020 full-year GAAP results were impacted by an increase in stock-based compensation expense, including a one-time charge of $47.8 million associated with the recognition of restricted stock unit expense in connection with our initial public offering (IPO), as well as a charge of $63.6 million related to the donation of 750,000 shares of our common stock to a charitable foundation after the closing of our IPO in our third quarter.
• Net cash provided by operating activities was $19.9 million for 2020, compared to net cash used in operating activities of $67.9 million in the prior year. Free cash flow in 2020 was $(20.2) million, compared to $(95.0) million in 2019.

Unity’s customers generating Operate revenues have about a 64% overlap with Create customers among those customers who represent $100K or more in revenues.

Unity says it has expanded the platforms it supports with the introduction of new consoles from Microsoft and Sony, Apple’s new M1 chipset, and the Microsoft HoloLens 2 Development Edition. The company says they’ve worked with all the companies to ensure apps built with Unity will run on the new platforms.

The consoles titles include Morkredd, an Xbox X|S Console Exclusive, and Haven and Overcooked 2: All You Can Eat, for both PlayStation5 and Xbox X|S.

Unity has expanded its non-gaming line with the introduction of Forma—a streamlined tool based on the Unity engine to enable configurable, photorealistic digital marketing content. They enable 3D interactive tools including configurators. The company is proud that Volkswagen is a customer.

Also in the quarter, Unity has acquired RestAR, a Tel Aviv based computer vision company that enables the use of mobile devices to scan and render physical consumer products. Unity notes that RestAR fits in well with Forma to develop assets.

While it’s not covered in the quarter’s revenue statement, shortly after the quarter closed, Unity announced the expansion of its Unity AEC product line which includes Unity Reflect, a tool for linking Revit models in the Unity engine to allow the development of visual exploration apps, rendering, and interactive applications. Unity announced the acquisition of VisualLive, a tool compatible with Autodesk’s formats including Revit, Navisworks, SketchUp, and AutoCAD that can create AR or XR visualizations.

In addition to Unity’s Create products, the company’s other major product division is its Operate Solutions, which include monetization, game services, and a multiplayer suite. It enables Unity customers to grow their revenues and their player base. The company notes that division has also been growing. They offer services which can connect game players with appropriate opponents. The company has also an accelerator program to support companies starting out with technology support, resources, and user acquisition funding.

Telling fortunes

Unity is providing the following guidance for the first quarter of and full year ending December 31, 2021.

In the financial call for the quarter, Unity CEO John Riccitiello says the company will end 2021 with revenues closing in on $1 billion but he’s not happy about Apple’s plans for mobile content customers. He said that he’s looking forward to future growth, but he warns that Unity might not see the same level of growth that the company had in 2020 because, like others in the gaming business, he sees some “tailwinds” as a result of the Covid lockdowns, but also because the company is expecting to take a “hit” due to Apple’s plans to change its IDFA (Identifier for Advertisers) agreements with customers. Apple will allow customers to choose whether they will allow advertisers to track them in games and apps or not. Riccitiello says he expects to see a lot of around $30 million as a result.

On the bright side, Riccitiello says Unity’s non-gaming revenues are growing and the company has plans for new tools along the lines of Forma that will let people easily create targeted interactive tools using the Unity engine. Also, as he looks out at the vast non-gaming universe, Riccitiello says he’s interested in building tools for artists.

He notes that artists working in Unity are very limited in what they can do. They often have to ask a programmer to implement changes they want, or get their work into the game, and so on. Riccitiello says instead Unity wants to build tools that enable artists and developers working at a high level create directly in Unity without having to get involved with the “more nuanced parts of the editor.” He says the company has already developed ArtEngine as a tool along that path but they’re working on more parts of the puzzle.

What do we think?

We’re so glad that Unity has gone public. It makes at least one big chunk of the game developer market more transparent. The work Unity is doing in its non-gaming sector is already promising and is going to spur Unreal in the same direction. Unity claims to have 50% of the game market if you include mobile, console, desktop, and cloud. They can make that claim because of the huge amount of mobile developers out there in the world. But, their interest in making 3D more accessible to everyone is a great avenue for reaching artists, filmmakers, and designers.

By the way, GDC Showcase is going on now. Unity says they’re exhibiting ArtEngine at the Showcase so, if you get a chance go see it in action.