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Unity Software IPO Analysis (U) & a Look at the Snowflake IPO and the First Day of its Stock Trading - YouTube
Channel: Healthy, Wealthy, and Wise
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unity software is slated to go public
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this week
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today we'll take a look into the company
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and its financials to help you decide if
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buying the company's stock makes sense
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and also we'll take a look back at how
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snowflake performed on its first day of
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public trading
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and what that could mean going forward
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if you like investing in hot new ipos
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this video is for you
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[Music]
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welcome to healthy wealthy and wise the
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channel that has evolved to talk about
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all the big and not so big companies
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going public
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whether it's by traditional ipo a spac
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or direct listing
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as always i want to thank everyone in
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the community for your fantastic support
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and i'm really enjoying the discussions
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we're having in the comments
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and for those of you new here my name is
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kevin and i want to welcome you to the
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channel for the first time
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and if you end up enjoying this video
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we'd love to have you join our community
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it's totally free no need to sign your
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life away or give up your firstborn
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you just gotta press that little red
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subscribe button and before we get into
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it
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please know up front i'm not a financial
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advisor and while my videos are meant to
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be informative
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they should not be seen as a
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recommendation for you to take any
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action on the companies covered
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you should always do your own research
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or consult with your own financial
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advisor when making any investment
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decisions
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so let's talk unity software the
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california-based company was actually
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founded in denmark as over-the-edge
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entertainment in 2004.
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in may of 2009 the company reorganizes
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the delaware corporation as unity
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software inc
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the company itself is a leading software
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platform for creating and monetizing
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video games
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their platform provides a comprehensive
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set of software solutions to create
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run and monetize interactive real-time
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2d and 3d content
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for mobile phones tablets pcs consoles
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and augmented and virtual reality
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devices
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according to their prospectus content
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built on the unity platform offers end
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users a fundamentally more engaging and
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immersive experience
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than traditional static content content
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made with unity is interactive
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allowing end users to connect with the
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content and with other users
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it is also real time allowing it to
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instantly adapt to end user behavior and
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feedback its content allows graphics to
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be expressed with three-dimensional
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shape and depth
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permitting multiple viewing angles and
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enabling augmented and virtual reality
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their platform consists of two distinct
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but connected sets of solutions
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the first one is a suite named create
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solutions which is offered by monthly
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subscriptions
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and is used by content creators such as
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developers artists designers engineers
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and architects
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to create interactive real-time 2d and
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3d content
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the second solution set is named operate
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solutions and it offers customers the
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ability to grow and engage their end
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user base
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as well as run and monetize their
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content with the goal of optimizing end
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user acquisition and operational costs
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while increasing the lifetime value of
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their end users
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operate solutions is offered primarily
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through revenue share and usage based
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models
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unity believes these two solution sets
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allows them to generate revenue from
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their customers
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as the customers using create solutions
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then drive adoption to operate solutions
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which makes sense because growing their
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user base and monetizing their content
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is the next step from creating the
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content and unity wants to make that as
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easy as possible for the customer
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so that they stay with the company as a
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one-stop solution
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for the year ended december 31 2019
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63 of their operate solutions revenue
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that came from customers with over one
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hundred thousand dollars in annual
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revenue
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was from customers that also used their
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create solutions
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as of june 30th 2020 unity had
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approximately 1.5 million active
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creators in over 190 countries
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and territories worldwide the
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applications developed by these creators
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were downloaded over 3 billion times per
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month in 2019
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on over 1.5 billion unique devices
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unity is responsible for about 53 of the
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top 1 000 games in apple's app store
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and google play as stated in their
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filing
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the dramatic growth of end user demand
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for interactive content
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is driving industries beyond gaming to
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embrace the advantages of real-time 3d
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content
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today major companies in industries such
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as architecture engineering
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construction automotive transportation
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manufacturing
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film television and retail are using
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unity across
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many new use cases including automobile
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and building design
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online and augmented reality product
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configurators
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autonomous driving simulation and
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augmented reality workplace safety
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training
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these new forms of content are emerging
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parts of the company's business and
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represent a significant opportunity for
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growth
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so that's a little background of the
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company now we're going to take a look
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at their financials starting with
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revenue
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for the years ended december 31 2018 and
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2019
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revenue grew from 380.8 million dollars
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to 541.8 million dollars
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representing year over year growth of 42
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along with that growth
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the company is also reporting strong
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gross margins of over 70 percent over
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the past two years
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now on the flip side the company has not
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been able to show a profit since its
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inception
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and over the past two years have
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reported net losses of 131.6 million
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dollars in 2018
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and then up to 163.2 million dollars in
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2019.
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much of the losses are due to high
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research and development costs including
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those costs being up 40
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from the previous year now recently they
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have shown a reduction in the amount of
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cash used in operations
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although in their filing unity devastate
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that can fluctuate
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so while the growth looks strong it is
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important to consider that they have yet
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to make a profit in effectively 16 years
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of existence
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so looking ahead let's try to see how
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much more we think the company can grow
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from the company's prospectus they
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believe that there's a total market
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opportunity of approximately 29 billion
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dollars
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across both gaming and other industries
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and then according to a 2020 market
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research report by research and markets
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the global gaming industry is expected
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to grow at a compound annual growth rate
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of 12 percent
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from 2020 to 2025 and by the end of 2020
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the immersive gaming segment is expected
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to generate 4.5 billion dollars
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so that's what's in front of unity now
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who is in their way
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well there are two sets of competitors
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one for their create solutions product
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and another for the operate solutions
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on the create solution side their
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primary competitors are considered to be
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epic gangs in check-on technologies
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you might be most familiar with epic for
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two reasons one is for the very popular
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fortnight game
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but also for the company's battle with
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apple and google about pricing on their
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app stores
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on the operate solution side they have
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some big names that are considered their
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competition
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including amazon facebook google
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microsoft and tencent
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however the competition on this side of
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the business isn't as clear cut or is
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direct
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as many of these competitors are also
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customers and partners
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so that's some information on the
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company that might help you in getting a
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better idea of what the company is about
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what kind of numbers they're producing
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and what the market and competition
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looks like in the near future
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the ipo is expected for thursday
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september 17th with trading then
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beginning on friday under the ticker u
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the initial pricing was expected to come
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within a proposed pricing range of 34 to
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42
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however that has since been revised
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upwards as the company now looks the
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price between a range of 44 to 48
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dollars
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at the midpoint of the proposed range
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unity would raise 1.2 billion dollars
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from the money raised the company
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intends to use the net proceeds for
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general corporate purposes
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including working capital operating
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expenses and capital expenditures and
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they also plan to repay the outstanding
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125 million dollars of debt that was
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borrowed in order to provide liquidity
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in case of any impact on the financial
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markets
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related to the pandemic but which they
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have not yet used to date
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if pricing holds unity would be valued
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in the 12 billion dollar range
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the company was last valued at around 6
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billion dollars in the middle of last
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year
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so now that it's going public which will
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automatically bump up its valuation sum
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and then reporting a strong year of
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growth since that last valuation
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at the ipo price i think that it's a
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reasonable growth evaluation
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at least as compared to some of the
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other high-flying tech companies we've
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seen
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ipo recently at the valuation when i
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look at the growth performance of the
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company
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a big market to work in one of its main
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competitors potentially hurting
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themselves in a legal fight with apple
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and even when considering it hasn't
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posted a profit yet in 16 years
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i definitely think it's a company to
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consider but again
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it all comes to the price we could end
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up getting it for and after watching
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some other ipos
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i don't know if it'll trade in a range
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i'm comfortable with we'll have to see
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what happens
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i'm sure that unity is hoping its ipo
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performs as well as snowflakes or even
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half as well
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wow is the only word i can use to
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describe that ipo i expected snowflake
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to trade higher than its ipo price
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but not the levels it did it opened out
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of the gate at 245 dollars
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more than double its ipo pricing of the
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night before of 120
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it then searched upwards immediately to
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the 300 range before settling back and
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closing at just under 254 dollars
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if you watched my previous videos on
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snowflake you know i like the rate of
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growth and the potential of high future
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growth of the company
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and when considering that along with the
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hype the pricing of the offering and the
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stamp of approval from warren buffett
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there was no question that buying the
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stock was going to come at a premium
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but i have to admit that while i really
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didn't know what to expect considering
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the super bowl levels of hype the
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company had
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it still came out hotter than i thought
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it would again
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wow it's the only word that describes it
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did any of you end up buying some shares
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or did you end up passing for now
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please let me know in the comments i'm
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curious to know
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i always say that what people within the
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market are willing to pay determines
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what the stock is worth
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so i'm not going to say that the stock
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is overpriced but for me
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even considering the red hot growth
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potential in future earnings
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the company seems valued too high too
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fast for me
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so i did not buy in at this time that's
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not to say i won't eventually
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i'll just look for an opportunity down
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the road some of you have heard me say
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in the past that i look at an ipo is a
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much longer race on a one-day sprint on
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that first day of trading
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i also look at the quiet period ending
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the first earning reports
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and then the lead up to and then the
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expiration of the locked up shares
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a quarterly earnings report with
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projections lower than the super high
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expectation the company has out there
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or the possible selloff from the
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insiders of all the locked up shares
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that previously couldn't be traded
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looking to capture some profits these
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are the times when the stock price could
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drop to a more reasonable level
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although there's never a guarantee that
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it actually will but because it often
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does play out that way
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think of beyond meat last year that's
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one of the reasons i covered the
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upcoming lock up expiration dates on
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each episode of ipo this week
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okay let's call it here this week has
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exhausted me
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i'm 99.7 percent this has to be the
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longest weekend video time recorded i've
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had on the channel
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as always i'll be back next week as we
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cover all the companies going public
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including the company that many people
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seem to either love or hate palantir
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i hope you join me and also just a
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friendly reminder to please like the
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video if you enjoyed it
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youtube really likes when you do that
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and if you haven't yet subscribed to the
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channel
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but are enjoying or finding value and
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learning more about all the companies
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going public
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i hope you consider joining the
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community we're growing fast and we'd
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love to have you on board
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and with that thank you for watching and
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until next time
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have a great day
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[Music]
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you
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