Unity files for IPO, reveals $163 million loss for 2019 and 1.5 million monthly users

Unity Technologies has filed for an initial public offering to help its business of making it easier for developers to create video games and other kinds of computer-generated entertainment.

The rumor of Unity’s IPO has been around for a while, and now the company has filed an S-1 statement with the Securities and Exchange Commission. For the first time, Unity publicly revealed its financials. In 2019, the San Francisco maker of the Unity game engine — used by 1.5 million monthly active users to create games and other content — reported a loss of $163.2 million revenue of $541.8 million. In 2018, the company reported a loss of $131.6 million on revenue of $380.7 million.

Unity said that its platform is used in over 50% of mobile games, PC games, and console games. Its rivals include Epic Games’ Unreal Engine, as well as more specialized engines such as Cocos and Game Maker. Unity believes its addressable market is $29 billion across games and entertainment such as TV commercials or animated films.

Above: John Riccitiello, CEO of Unity Technologies.

For the first six months of 2020, Unity reported a loss of $54.1 million on revenue of $351.3 million, compared with a loss of $67 million on revenues of $252.7 million.

Unity faces tough competition from Epic Games’ Unreal Engine, which is boosted by Epic’s success with the Fortnite battle royale game.  In 2019, Epic Games reported $730 million in earnings on revenue of $4.2 billion, according to information obtained by GamesBeat. Epic recently raised a couple of rounds of funding at a valuation of $17.3 billion. The rounds included $250 million from Sony, which has a 1.4% stake.

Unity said its engine supports customers in games and other apps with 3 billion downloads per month. About 150,000 new projects are started each day in Unity, across 190 countries. The games range from the zany Fall Guys: Ultimate Knockout and Ori and the Will of the Wisps.

The Unity game engine differs from Unreal in its origins. The company was started in 2004 as a game company by David Helgason, Nicholas Francis, and Joachim Ante. Their first game failed, but they found that the tools they made to simplify game development were a commercial opportunity, and they pivoted to a mission of “democratizing” game development. They targeted both 2D and 3D content, particularly in the fledgling mobile game industry. When the iPhone launched in 2007, Unity started taking off. Now it is moving to higher-quality productions and tools, giving competition to the PC and console focus of Unreal Engine. Both companies are meeting in the competitive middle, with Unity coming up from the low end and Epic Games moving down from the high end.

The game engines are critical now because they enable game makers to save time. They write the games once for the game engine, which then converts the code so that it can run across a variety of platforms, which have multiplied over the years. In 2014, John Riccitiello, former CEO of Electronic Arts, replaced Helgason as CEO. Lately, Unity has been expanding beyond the game industry into other entertainment, and it has also been acquiring companies such as Digital Monarch Media, Vivox, Artomatix, and Codice Software. Customers include game developers, artists, architects, filmmakers, and automotive designers.

Above: Unity Technologies has 1.5 million monthly active users.

Meanwhile, Unity has been raising a lot of money at higher and higher valuations. In May 2019, Unity raised $150 million at a $6 billion valuation, and that was on top of $600 million raised prior to that time. Unity has been investing heavily in research and development, with more than $450 million invested in the past two fiscal years.

In June 2019, former human resources vice president Anne Evans filed a sexual harassment lawsuit against Unity and Riccitiello for alleged harassment and wrongful termination.

Unity’s big shareholders include Sequoia Capital, which owns 24.1%, followed by affiliates of Silver Lake Partners with 18.2%, and J.A. Technologies with 8.2%. Unity plans to use the money for its own financial flexibility and general corporate purposes, as well as pay $125 million in debt from its credit facility.

Software built with Unity runs on more than 1.5 billion devices. It has 53% of the top 1,000 mobile games on the Apple App Store and Google Play.

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