Unity has said it is likely to “discontinue certain offerings”, reduce its workforce and its “office footprint” despite hitting its Q3 2023 guidance.
The company said in its latest financial report that the announcement – and partial rollback – of its Runtime Fee policy led to “a high volume of negative customer feedback including a boycott and a slow down of signing new contracts and renewals”. The boycott did not “materially impact” its financial results, Unity said, and the company still expects “a potential benefit” from the revised pricing model long term.
Following the departure of CEO John Riccitiello, Unity is now under the interim leadership of former Red Hat CEO James Whitehurst, and has begun a “comprehensive assessment” of its portfolio to refocus the business on its core products.
“This assessment will likely lead us to decide to discontinue certain offerings, reduce our workforce and reduce our office footprint,” said Unity. “The timing and full impact of these types of changes on our future results of operations, cash flows, or financial condition are uncertain, and for those reasons we are currently unable to reasonably quantify the potential impacts through the fourth quarter of 2023.”
Unity also put a number on its well-publicised long-term losses in the financial report, stating that it had generated an “accumulated deficit of $2.8 billion” from the company’s inception through to September 30 2023.
Despite all that, Unity’s Q3 2023 revenue came in within guidance, and the company beat its adjusted EBITDA target. Revenue for the quarter was $544m (within guidance range of $540-550m) and adjusted EBITDA was $131m, way above guidance of $90-100m.
There were also references to several rounds of legal proceedings involving Unity deeper in the Q3 2023 report. The first lawsuit “alleges that the Company and its executives made false or misleading statements and/or failed to disclose issues with the Company’s product platform and the likely impact of those issues on the Company’s fiscal 2022 guidance.” Unity “believes this lawsuit is without merit and intends to vigorously defend the case.” It is currently awaiting a ruling on a motion to dismiss the claim.
Another derivative suit brought against eleven of Unity’s current and former officers and directors is a claim for “breach of fiduciary duty, waste of corporate assets, unjust enrichment, and violations of Section 14(a) of the Exchange Act.” A further derivative claim was filed by a purported Unity stockholder against twelve of Unity’s current and former officers and directors, which “asserts claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets.”
Unity also paid out $100,000 to settle a putative class action complaint that alleged that Unity directors “breached their fiduciary duties by failing to disclose all material information necessary to allow stockholders to make a fully informed decision on whether to approve the issuance of new shares” related to Unity’s merger with IronSource.
It’s been an eventful few months for Unity following the unveiling of its Runtime fee policy. Developers were outraged, and as we reported in the days following the announcement Unity account managers offered clients waivers on the Runtime Fee if game-makers switched to its ad mediation platform LevelPlay.
The following week, several mobile developers announced a Unity boycott in an attempt to force the company to reconsider the Runtime fee policy. Unity later relented and announced a new set of price policies, and in early October CEO John Riccitiello announced his retirement.
We later spoke to multiple Unity insiders and game developers to get a fuller picture of what had been happening behind the scenes at the company during the whole saga.