Started Abruptly] …operate business. This call will have a similar structure to past calls. John and Luis will provide a business overview. Then we’ll answer kind of the three questions that we’ve received the most from investors and analysts. And then we will open up the call to panelists to open Q&A and we plan to wrap the call up within an hour. Now before we start, I will run through our Safe Harbor statement. As I -- as you know, so we’d like to say, I’d like to remind participants that during this conference call, we will be making forward-looking statements, including statements about goals, business outlook, industry trends, market opportunities, expectations for future financial performance and similar items, all of which are subject to risks, uncertainties and assumptions. You can find more information about these risks and uncertainties in the Risk Factors section of our filings at sec.gov. And we remind everyone that our actual results may differ and we take no obligation to revise or update any forward-looking statements. Now, we will also be discussing non-GAAP financial measures today and reconciliations between our GAAP and non-GAAP financial results. And a discussion of the limitations of our non-GAAP financial measures can be found in our earnings press release, which was issued earlier today and is available on our website under the Investor Relations tab. So, now with that, let me turn the call over to John.

So, thanks, Richard, and good afternoon. We delivered another really good quarter, October to December to close out 2021 with great momentum. For the quarter, revenue grew 43% year-over-year to $316 million and our non-GAAP operating margin was minus 3.8%, expanding 530 basis points from a year earlier. Underpinning our growth, our healthy net dollar expansion rate of 140% and the addition of 259 customers each generating over $100,000 of revenue in the trailing 12 months, reaching 1052 customers at that scale at the end of the year, up from 793 a year before. For the full year, revenue of $1.1 billion, grew 44% from a year earlier and non-GAAP operating margins were minus 4.6%, an improvement of 200 basis points from a year ago. With very healthy gross margins and our largest expense being R&D, ours is inherently a net -- a high net margin business. We’re committed to continuing to improve operating margins as we continue to gain scale. These results have been and will continue to be driven by excellence and execution by the Unity team. We have built our business on a strong foundation based on very healthy customer metrics and structural economics. We enter 2022 with momentum across both Create and Operate, which gives us confidence in our outlook. For the year, we expect to grow revenue to be between $1.485 billion and $1.505 billion, which represents growth between 34% and 36% from 2021. And we believe Unity is very well positioned in a fast growing market, which we are expanding even further with internal innovation and strategic acquisitions. As we’ve said before, we expect to grow revenue above 30% for the long-term and expect to expand operating margin sequentially, breaking even on a non-GAAP basis within 2023. With that, let me explain why I’m…

Thank you, John. So I am back to a normal real human being here. I’ve watched this video many, many times and continue to be impressed by the amazing technology. So let’s begin with the key financial highlights. Revenue for the fourth quarter of $316 million increased by 43% as compared to the prior year’s fourth quarter. These results include $4 million in license fee from Weta FX, excluding this revenue for the quarter would have increased 41% year-over-year. Resource for the quarter beat guidance again, as you would expect every quarter has risk and opportunities. Since we prudently assess risk when constructing guidance, we can beat guidance if things fall our way. In the fourth quarter, Create accelerated growth, the Weta acquisition closed more earlier than expected and Operate continue to perform very strongly. Revenue for the full year of $1.1 billion increase 44% year-over-year, behind strong execution by the Unity team, our performance for the year came in significantly above our initial guidance of revenue growth of 23% to 26%. Importantly, our performance is broad-based, Operate deliver another strong quarter with 45% year-over-year revenue growth, bringing the full year to $709 million, an increase of 51% from the prior year, as we help their customers in a challenging IDFA environment. Create accelerated again in the fourth quarter and delivered 49% year-over-year revenue growth. This brings Create’s total revenue to $327 million for the full year, an increase of 41% from a year earlier. Strategic Partnerships revenue grew 12% this quarter and delivered $70 million for the full year, an increase of 7% from a year earlier. We continue to see strong customer success this quarter. Our dollar based net expansion rate for the fourth quarter was 140%, off from 138% in the fourth quarter of 2020 and we…

Okay. Thanks very much. So, okay, we’ll open up the call to live questions in just a bit, but before the call, ask…

Richard are you still here.

We lost you Richard.

Interesting. Richard, are you here.

Are you here? You’re on mute.

It says I’m not on mute.

Okay. We can hear you Richard.

Okay. Yeah. I don’t know what happened there, getting muted by the host. In any case, no worries. Okay, we’ll open up the call to questions in a bit, but before the call, I just -- we asked the analysts to send us some of their most thought provoking questions. We called them down to the best three that we will answer now. And right after that, we’ll go to live questions from our panelists. So the first question comes from Kash Rangan at Goldman Sachs. In my mind, almost be an understatement to say that there’s a lot of transitions happening in the software world, 2D to 3D, cross-multiple industries, new business models and so on, and of course, that’s probably a two-hour conversation, but we’ll keep it much shorter. But this is a good question, I think, for John to just kind of quickly frame kind of the crosscurrents, how they’re playing out and where Unity can capitalize on these trends.

So, it is a great question. So headline number one is, my expectation is the use of real-time 3D interactive technology is going to expand many fold. I’ve said this dozens of times from prior to our IPO to now. It’s -- some people call it a metaverse. But one part of it is industry-after-industry, they’re going to be launching real-time 3D experiences, interactive experiences and we’re seeing that in so many industries. Now, it’s almost hard to keep track. Second part of that is gaming industry is continuing to expand, and of course, with Unity, we’re bringing artists onto the platform to substantially increase our revenue take rate as part of that. So headline number one, what’s our role? Our role in all of this is, first, and I think it’s a good analogy to the Gold Rush from Lewis, lots of people are doing all sorts of things striking gold in lots of different ways and we make the underlying technology where most of these real-time 3D experiences are built. We generate subscription revenue, ratable revenue from that. The second part of it and the analogy is a little bit more stretched here if I want to think about as the steam engine, but every one of these websites needs an engine, an engine for monetization, for analytics, for streaming, for the build process. That’s what our Operate team does. And so, we’re not necessarily out there with picks and shovels looking for nuggets of gold, we’re serving the entire collection of multiple industry companies that are building and deploying products, both to create those products and to help those products operate. We generate money in both ways. I also mentioned crypto, there’s certainly a lot of noise about that. Within the game industry, there’s a love hate relationship. There’s people that explain how it’s wonderful and others explain why it’s a misery. I point out that most, if not nearly all, of the NFT centric games that have been built and deployed today are built on Unity. I think that’s really cool. We see many great things around innovation that can come from some of these new NFT centric designs. We also see a lot of problems around energy consumption, schemers, scammers, a lot of things we don’t like. And one of the things we think that we have an obligation is, when we see innovation like this, is to find a smart way to make sure that the good things happen in the bad things don’t. We do that on behalf of our creators and we do that on behalf of their customers. So Unity’s role, we’re all the things that aren’t the gold nugget finders in this new world, huge wind behind our back for this industry. We are making the tools for creation, for operation and we will bring them around to support, firstly, every metaverse or web3 application type you can imagine.

Great. Thanks very much. And Luis, Parker Lane at Stifel had a good question about our financial philosophy kind of how we think about economic -- the economies of scale, growth and profitability. You touched on it a bit on your prepared remarks, but maybe if you just drill down a smidge more on, that’d be great?

Yeah. Thank you, Richard. A great question. So, I think, if I think at a high level, the framework we use to make investment decisions is very simple, which is we invest in those ideas that create the most value to our creators and to our shareholders. So we’ve talked a lot about creators so far in this call. So let me spend a little bit more time about shareholders or the three shareholder of this three drivers of shareholder value creation, that is revenue growth, margin expansion and free cash flow efficiency, the one that will make the biggest difference for us in, at this particular point in time, is revenue growth. Just think about it, we just crossed $1.1 billion and we operate at a $45 billion market. So we are about a 2% of the market. The take rate is way too small and we have business momentum. So that is the biggest driver. Just think about the difference of growing at a 20% CAGR over several years, versus 30%, versus 40% and the cash flow potential of that. Now that doesn’t mean we’re not going to pay attention to margins and free cash flow, we definitely will. So if you think about what we’ve done since 2019, so between 2019 and 2021, we doubled our revenue, right? That’s what we did. In the same -- at the -- during that same period of time, we improved our non-GAAP operating margins from minus 16.9% to minus 4.6%. So significant improvement, and obviously, we made similar progress on free cash flow. So we actually have been driving both or all three drivers. Now, how have we done it, which I think is very important to understand, we’ve been able to do that, because we’ve been driving efficiencies in…

Great. No. That’s super helpful. All right. So one of the things we like to do here is highlight the depth of our management team, and you remember, last quarter, we introduced Marc Whitten who runs Create. So this quarter, we invited Ingrid Lestiyo, who’s our Senior Vice President and General Manager of the Operate Solutions to add some context to some of the questions you might have in that area and so we’ve had a hand -- Ingrid we’ve had a handful of questions with a similar theme. Bhavan asked at William Blair, Matt Cost at Morgan Stanley, Stephen Ju at Credit Suisse. But the question is basically revolves around this is, like, we’re seeing a lot of consolidation on the studio side. And how are you thinking about kind of first-party data approach that seems to be an effort of some of these studios versus the contextual dynamics offered by the Unity platform?

Yeah. Hi, everyone. Glad to be here. So, our contextual approach provides numerous advantages. Even the largest game companies out there have a few 100 millions to use or so. We reach more than 3 billion devices. And unlike any other ad tech companies, the majority of mobile games out there are made with Unity, using our engine and our game services. That’s not quite the same as an ad tech company claiming a 3 billion reach. We have deep, deep context about gameplay, what the players like to play, when and how they play the game. And in gaming, that has proven to be the most relevant data for advertising. And it’s going to take quite a while for anyone, even to get to a quarter of the context we bring to our developer audiences every day. So let’s quickly address first-party data. Let’s assume we’re talking about first-party games data. First-party data is not bulletproof. First games are a hit driven business and even the best of games have a decay curve. So you really have two choices, if you’re in that business, either you create the next hit game, which we all know it’s pretty hard to do or you spend by studios that are producing them and that’s hard to sustain. The second thing is being end-to-end with first-party in this ecosystem is nearly impossible. So no matter how many companies anyone acquires, contextual data scales in a much more unlimited way. Well, first-party is limited to users only coming to your own and operated game. So, with respect to industry consolidation, where I can say that we’ve always had competition in this space, all varieties of it and from the day we started eight years ago and we’ve consistently executed and taken and gain market share, including against the largest companies in the space.

Thank you so much. All right. Well, now we’ll open it up to see a bunch of your virtual hands up there. So virtual hand number one, we’ll have Kash Rangan at Goldman Sachs. If you have a question, that’d be great.

Hi. Thank you very much and really enjoyed the presentation, spectacular results. John, if you could just give us an update on the Weta acquisition. I know that you’re really excited about the expansion into the designer versus the developer audience that you’re excited about. Just wanted to follow up on that, how do you think the synergies are playing out since you closed the acquisition, you’ve had a chance to do even more work? I am curious how you gauge the synergy between the core technology and how Weta can play into synergizing your Design business and Operate business? Thank you very much.

Should be on here momentarily. Sure.

Talking on at microphone and a dead camera. So thanks for the question. Great questions. So what is that Kash I have been really kind of overwhelmed by, and in I’ve had a lot of conversations of late, I’m not going to name the people I’m having conversations with. But if you read the Hollywood rags, these are the names of all the people that matter and similar set of conversations with folks in the game industry. And in the first synergy that comes out of this is, we just liberated one of the coolest assets that existed all of art and all of technology and all of content creation, the weather tool set. The number of companies that are knocking on my door to say, we want to be your pilot customer, because we want out those tools. It is pretty substantial. And so it’s -- I can’t really overstate how much interest there is an engaging now that the tools aren’t captive of a single company that’s got, if you will, ILM does not want to use tools from Weta they compete. ILM now wants to use tools from Unity. Now, I’m using ILM as an example. I’m not going to point to them. So let me take that last part about the naming of them. But the notion of it is pretty clear. The second point I would make is that, this exists not just in the film industry, but in the game industry that wants their stuff to look that good and architecture and other digital twin or when they want their stuff to look that good and so the liberalization or the democratization of those tools is a winner. But the second thing and this is a little bit more subtle, but just as important.…

Super compelling. Thank you so much.

Thanks, Kash.

Bhavan over the William Blair.

Hey. Thanks, team and let me echo to congrats Kash. It was a spectacular quarter. I guess it’s a question maybe for John and for Ingrid, a little bit. So I know Kash asked initial question about metaverse. But I want to delve into a little bit more. John you said, okay, we’re not the guys who are going to be building those nuggets or finding the nuggets, we’re going to play the platform. But if we fast forward five years, we’ve got lots of the stuff that’s been developed in Unity. I would love to walk through how you think the data layer, the way you interoperate between consoles and games and different games, ends up being a huge strategic value to you from the Operate side. So imagine being able to target these people across this multi-data layer, multi-metaverse, multi-3D experience. Helped me think through how you’re thinking about that and what that might look like five year, six years, seven years down the road.

Hopefully sooner than that. But most all content you consume today, television or any other sort of content other than a game is basically an artifact, by the time you have it. It’s a model, it’s a -- it’s video. It doesn’t change. It is what it is. It is one fixed thing. And the only software that’s typically operating on it might be something to stream it and that usually a big part of that as a compression and decompression algorithm. So it can go more efficiently over, whatever transmission technology is being used over the air or cable or satellite or whatever, that’s just to compile little bit to move around. And so these artifacts are, I think, going to be dead and buried by 2030. That’s just not the way it’s going to work. The way it’s going to work in the future is, all of the work that a Peter Jackson together with a cinematographers, together with the artists and the technologists there, that’s going to be data. It’s all a giant piece of data. Now, what operates on that data are a set of tools that turn that data into the next frame, and remember, now that frame is being produced in real-time in response to user input. Now, that might be you sitting on a couch, wanting to compose your Christmas picture, put different clothes on your kids, instead of going to like Nike or Everlane or all these websites, you say, I want all of us and whatever color that will come to you. That’ll be the metaverse version of shopping. But whatever that is, it’s going to be data separated from, it’s not an artifact, it’s data that gets operated on by tools and those tools will be things like Lumberjack or…

Where they operate?

Yeah. It’s just a lot simpler. So the line of sight we have is, we’ve been building something that’s got a lot of complexities. We describe it. You’ve heard this over the years. I have been investor for a while. But now are covering us for a while. The simplicity comes as we get closer to what we’ve been approaching, because it’s no longer a disruption of what we’re building. It just works. Now, Ingrid, do you might want to speak to one major piece of this just to add to Bhavan’s question, which is, how important in this is the Operate side, and in particular, the self-serve notion of the Operate side?

Yeah. Thanks, Bhavan. So a couple of things. I think if we think about -- John talked about the next renditions of metaverse destination, if we think about all of those renditions will have one thing that’s true, which it will be some form of Multiplayer experiences. With a times millions of concurrent users coming together in an experience and on the data front, an experience like that, there’s always going to be some kind of bad behavior. So you need moderate -- intelligent moderation tools, all of those experiences will need monetization and that requires, obviously, some intelligence and data to be able to serve the most relevant monetization solution and engagement in whatever, whoever is the creator of that experience would need to engage with their users. And they want to run engagement campaigns, et cetera, that requires the similar set of data that we use today to make sure that our developers are successful in running their games.

Got it. Got it. Thanks for the detailed response. That was really helpful. I appreciate it, guys. Thank you.

Matt Cost at Morgan Stanley.

Great. Thanks. I think it says I can’t get my video on but that’s all right. I’ll do it on audio. So I guess just on the Create side, it says that, well, there’s a video. So you guys still hear me?

Yeah.

Yeah. We hear this one.

Okay. Cool. Sorry about that. It froze for a sec. So on the Create side, it looks like you put up the strongest quarter really ever. I mean, even if you back out $4 million for Weta, it was bigger dollar add then you had last quarter, which I think was already the biggest quarter you had done, it was 1500 basis points acceleration. I guess, are there any specific drivers that you would point to in Create that is real strengthened and has something changed in the past two quarters.

I’ll give a high level to that and Luis, you might want to add to this. But the first is, we’ve finally gotten to some scale on non-gaming applications, digital twins and verticals. And so we talked a lot about, I mean, how we are going to get early product traction and now we’re getting more substantive product traction as part of it. The other part is, I think, we’ve done a really nice job under Marc Whitten’s leadership to help simplify and clarify our go-to-market. And then lastly, we’ve seen, I’d say, an increase in productivity out of R&D and producing products and features that hit the product market fit that you want to see. But it’s frankly -- it’s what the stuff we were talking about, I have to admit took a little longer to adjust that. And I’m happy to be here now then looking to wanting to be here as I was a year ago. But we feel really good about the underlying trend lines in Create. And I get point to individual customers but you see the announcements, they’re now starting to happen with some level of regularity and that happens with things like Hyundai which see in the non-gaming side or you see like, you didn’t use to see major companies like Riot produce multi-platform inclusive of console on third-party tech now they do with Unity. So you are seeing it in the market, took a little while to catch up on the execution side, because some of these things take a while to build with sales cycle can be a while.

Yeah. Thanks, John. Just to complement and in line with what we said earlier, we’re getting good traction both in games and outside of games, which is just terrific. Now we expanded our market share within gains from a pretty healthy base. And as you as you heard me say earlier, that’s coming from AAA games all the way to in these games, right? So we’re covering more and more customers across the Board. And I think it was really a good non-gaming quarter. Now I talked about some of the success stories. Now a lot of in the auto industry, I mean, from a auto industry, to education, to machine manufacturers, right? So we’re really seeing a lot of traction with digital twins and we’ll continue to drive that. Now we think that there is a lot more opportunity ahead. Now not every quarter will be perfect, right, because we’ll always have a quarter there where we struggled bad. We’re very happy with where we are today. Very, very happy.

And for those of you that have seen the sports Metacast stuff that we put out there in some of the videos, that’s basically a digital twin. What are we doing? The cameras are IoT. We’re consuming the data of 50 to 120 cameras, depending on the sport, the instance and then we’re presenting it back. But when you look at that and imagine that as a digital twin, look how dynamic it is. If you looked at digital twin applications coming out of most companies, they move about as fast as a painting. Now nothing’s really happening there with some data that’s coming off of it. It’s a static model. People are starting to see what you can get the dynamism off their datasets and they’re -- they like what they see. They already has a competitive advantage in the space and I think it’s being internalized by folks across multiple industries.

We don’t talk enough about…

Okay. Great.

… our net expansion rate and 140% just massive. I mean, very few companies have are able to achieve that and we’ve been able to sustain it for a pretty long time now and that is both Create and Operate. So very, very healthy there as we continue to add new customers, we just wanted to add that piece.

Fair. Thanks, guys.

Thanks so much. Brent Bracelin of Piper.

Thank you. Great to see the team here. I’ll just go ahead and ask the question here. I want to drill down into the Operate business. Obviously, we spent a lot of time with investors talking about the ad part of Operate. But if I look at the Unity Gaming Services suite, I think, there’s eight add-on products. They’re all in beta. Just trying to think through growth levers for Operate? Maybe for Ingrid and you John. What’s the early feedback on some of these new add-ons? Can they become incremental kind of growth drivers to the ad business in 2022? Are those really seeds to try growth in 2023, any more color around how we should think about the levers for offering beyond just ads, which obviously are gaining share.

So I’m going to take part of it, but I didn’t want Ingrid to speak to this one. She runs all of that. And let me just admit, it’s fun to be in the same room. I did my one-on-one with her an hour ago. And we spent the last hour with this on a whiteboard. All of the surfaces, how they plug in together, how they’re synergistic, how they draw people into revenue services, how they solve problems. I think one of the less appreciated but more important parts of Unity is just how well this works and how well it’s going to allow us to scale. And some of the principal components are, just a couple high level points. One is all those games services, typically they have two, three, four, five vendors to do all of these things, all different data types, different data sets, it’s impossible to run that way. It’s a mess. And so we solve a mess. All of these things require pretty tricky implementation. Ingrid is maniacally focused on self-serve, hit a button and it just works. And they all connect magic-magic to a revenue producing service that we love called Multiplayer. So Ingrid, you might want to take it from there. I’m taking a little break, because it’s a fun parade to stand in front of.

Oh! Thank you, John. So, first, let me just first -- you alluded to eight actually, the feed that is Unity Gaming Services combined 14 services into one platform, one dashboard, one login. And to John’s point about self-serve, we made it so, so simple for our developers to quickly launch Multiplayer cross-platform games with just a few simple clicks from the editor. 59% of all Americans are playing Multiplayer games. So we are seeing at Unity that the interest in building these games is there from developers. From studios of all sizes, but it is just too hard, till then for the small-to-mid size studios. They need to hire an army of like network engineer, security engineers. And now they have access to a platform like us – ours that reduces the resources and the risks to realize their vision. So we’ve seen thousands of projects started using Unity Gaming Services in less than three months. And the feedback has been really positive, but also helpful. We still have a lot of work to do to round out the performance and feature sets as they need in the platform. And I think what is really exciting is that we are seeing early some of these smaller studios going further than they’ve ever had before and that makes us really excited for this space.

Project study and the 14 instead of eight implies you have been really busy, so great seeing you again and thanks for taking my question.

Thank you.

Thank you, Brent.

Thank you. All right. Well, we have one time for one last question from Martin Yang. There you go. There is -- at Oppenheimer. Get up and have it.

Hi. Thank you for taking my question. My question is around digital avatar. And now you have a lot more creation tools. How do you think about providing direct venues for creators to monetize their digital creations through Unity?

A lot of -- there’s a lot of pieces in that. Let me just have a little bit of fun by throwing water on one idea that I think seems to have gotten a lot more currency in the market than I think it probably deserves is the idea that we all want one avatar. I really don’t want to show up in my swimsuit for an RPG with a sword in my hand, if that’s my avatar, I am --I think, we’re going to want a lot of things that are more dynamic than not. A second thing is, with the acquisition of Weta and the Ziva, and some of the other things we have now in our portfolio. When people are going to try to create avatars, I mean, look at the young lady, you just saw that she doesn’t truly exist. But the average creator can do that. Look at the movies like Avatar and the Marvel stuff created with Weta tools. You can do anything in Unity. So my sense is that we are going to see a huge amount of creation on that side. You’re also going to see something, again, you didn’t directly ask this. But I think what’s more interesting when it comes to some of these asset creations. Now most NFT’s today are just really JPEGs printed on a blockchain. What’s interesting in real-time 3D is that these assets have Utility, strength and resilience. Anybody who has played a game know how an asset can have Utility. And one of the things that we’re hot on the trail for is enabling the assets that a consumer might want to own and setting them up in a smart way. So the underlying registries of value can be built upon and traded. And so…

Thank you very much.

All right.

Well, thank you very much. It’s good to have a lot of things to talk about. I’ll let John kind of conclude. But just so you know, like, we’ll be at the Berenberg, Diawu [ph], Morgan Stanley and Wolfe conferences this quarter. But John, if you just want to close up, that’d be great.

All right. Well, hey, everybody. Thanks for being with us today. Good evening to those of you on the East Coast. Good afternoon on the West Coast. But we enjoyed it. We hope you did too. So thanks again.

Thank you, everyone.