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Earnings Results: Unity loses less than feared, trims outlook as Applovin makes $20 billion bid for software company

On the same day it received an offer to acquire the company for roughly $20 billion, Unity Software Inc. reported a loss that was less than feared and pulled back on its guidance for the year, and shares slipped in the extended session.

Unity 
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+1.19%

which produces videogame-engine software that competes with Epic Games Inc.’s Unreal Engine and helps developers monetize their games, reported a second-quarter loss of $205.8 million, or 69 cents a share, compared with $148.3 million, or 53 cents a share, in the year-ago period. The adjusted loss, which excludes stock-based compensation expenses and other items, was 18 cents a share, compared with a loss of a penny a share in the year-ago period.

Revenue rose to $297 million from $273.6 million in the year-ago quarter.

Analysts surveyed by FactSet had forecast a loss of 21 cents a share on revenue of $299.7 million, based on Unity’s forecast of $290 million to $295 million in revenue.

That comes following an offer from app monetization company Applovin Inc.
APP,
-10.29%

to buy Unity for $20 billion in cash and stock. Shares of Applovin finished the day down 10.3% at $36.01, leaving it a $13.6 billion cap company, according to FactSet.

At the top of the conference call with analysts, Unity Chief Executive John Riccitiello acknowledged that the company had received an offer and that it would make no further comment.

That offer comes following flak that Unity recently caught about its own M&A plans, with the most recent being Unity’s $4.4 billion offer to buy IronSource. Unity shares recently rose on reports that it was looking to spin off its business in China. Shares declined 3% after hours Tuesday, following a 1.2% rise in the regular session to close at $50.35, giving the company a market cap of about $15 billion, according to FactSet data.

“We are encouraged by the progress we are making to get Operate Solutions back on stable footing,” Riccitiello said in a statement. The CEO was referencing Unity’s previous earnings report, which was marred by a disclosure that its ad-targeting tools contained a flaw, the same tools that had been credited with finding a workaround to Apple Inc.’s
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+0.03%

opt-out of using Identifier for Advertisers, or IDFA.

Unity forecast third-quarter revenue of $315 million to $335 million, and full-year revenue between $1.3 billion and $1.35 billion for the year, compared with its previous forecast of $1.35 billion to $1.43 billion.

“In Create we have momentum with customers in and outside of Games,” said Luis Visoso, Unity’s chief financial officer, in a statement. “Our Business outside of Games is growing even faster and now represents 40% of our total Create Solutions revenue, up from 25% in 2021.”

Analysts estimate a loss of 7 cents a share on revenue of $343.7 million for the third quarter, and a loss of 37 cents a share on revenue of $1.36 billion for the year.

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