Unity Software raises outlook above Wall Street estimates following strong quarter

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Unity Software Inc. shares slid in the extended session Tuesday, following an initial uptick, after the gaming-engine company reported quarterly results and a raised outlook topping Wall Street estimates and announced plans to acquire a remote-streaming company.

Unity U shares, which had been up more than 3% after hours, were down about 1% following the end of the conference call. That followed a 2.8% decline in the regular session to close at $107.15. Unity’s stock has more than doubled since the company priced its IPO at $52 a share last September.

“While our strong performance is broad based, we are particularly proud of the performance from our Operate Solutions group that expanded market share in a tough environment,” said Luis Visoso, Unity’s chief financial officer, in a statement. “Our strong performance gives us confidence to raise guidance for the year, again.”

Unity forecast third-quarter revenue of $260 million to $265 million, and raised its revenue outlook to between $1.05 billion and $1.06 billion for the year, compared with a previous forecast of $1 billion to $1.02 billion for the year.

Analysts had estimated a loss of 9 cents a share on revenue of $253.3 million for the third quarter, and a loss of 34 cents a share on revenue of $1.01 billion for the year.

The company also announced plans to acquire remote-desktop and streaming-technology company Parsec for about $320 million in cash, and expects the deal to close in the third quarter. Unity reported it had more than $1 billion in cash and cash equivalents at the end of June. Parsec, which was founded in 2016, has already received about $33 million in venture funding, according to Crunchbase.

On a conference call with analysts, Unity Chief Executive John Riccitiello called Parsec “a key step” for the company, “based on our shared understanding that creators expect to work from anywhere on any device and will require rich and powerful tools and cloud infrastructure real-time 3D.”

Riccitiello added said that the company’s raised guidance did not take Parsec’s expected contributions into account.

Unity, which competes with Epic Games Inc.’s Unreal Engine, reported a second-quarter loss of $148.3 million, or 53 cents a share, compared with a loss of $27.3 million, or 21 cents a share, in the year-ago period. The adjusted loss, which excludes stock-based compensation expenses and other items, was 2 cents a share, compared with a loss of 9 cents a share in the year-ago period.

Revenue rose to $273.6 million from $184.3 million in the year-ago quarter as the company added new customers and expanded business with existing ones.

Analysts surveyed by FactSet had forecast a loss of 11 cents a share on revenue of $242.3 million, based on Unity’s forecast of $240 million to $245 million in revenue.

Read: People are still playing a lot of videogames, but how much?

Last week, the bulk of major videogame publishers — Activision Blizzard Inc. ATVI, Take-Two Interactive Software Inc. TTWO, Electronic Arts Inc. EA, Zynga Inc. ZNGA and Playtika Holding Corp.  PLTK — reported quarterly results, which, while strong, carried outlooks that suggested last year’s pandemic-fueled growth was reaching a plateau. Roblox Inc. RBLX reports its results on Monday.

Following Activision Blizzard’s damage control following allegations of workplace inequality and sexual harassment, Unity’s Riccitiello addressed the company’s stance on the conference call.

“We’re committing to an inclusive workplace and governance approach gradually, and our values of empathy, respect and opportunity. There is a lot more work to be done, but we continue to be committed on this one and will be sharing more details at a later date,” Riccitiello said.

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