[Abrupt Start] …future financial performance and similar items, all of which are subject to risks, uncertainties, and assumptions. But you can find more information about these risks and uncertainties in the Risk Factors section of our filings at sec.gov. Actual results may differ.

We take no obligation to revise or update any forward-looking statements. We will also be discussing our non-GAAP financial measures today and reconciliations between our GAAP and non-GAAP financial results and discussions of limitations of non-GAAP financial measures can be found in the Investor Relations website.

With that let me turn it over to John..

Infinite and movies like Dune. Users of our Ziva Dynamic's technology and winners of six Academy Awards including the Oscar for Best Visual Effects keep an eye out for those sand worms. One more note on Ziva. In the first quarter, we received more than 8,000 sign-ups in a multitude of cloud uploads for our beta of Ziva Faces.

This service enables artists to use advanced machine learning models and massive data to train meshes for full expressiveness, instead of requiring teams of artists to spend weeks doing manual rigging.

This is an extraordinary and expeditious result that speaks to our goal to make 3D art in media games and everywhere 10 times easier, 10 times faster and 10 times cheaper than it is today. We have more work to do, but we're gratified to see all this early traction. Moving on to Digital Twins. Our business continues to expand.

We entered 2022 with nearly 3,000 customers in this space. Our digital twin customers are spending more time with us as we land and expand to drive tangible outcomes with real-time 3D across the enterprise. This quarter we closed 34 deals above $100,000, up 126% year-over-year and up 13% quarter-over-quarter.

Unity is being used in construction, commerce manufacturing, advanced simulation and much more. We are seeing broad-based adoption of these tools from companies like Mercedes-Benz. Unity is partnering with Mercedes to power the infotainment domain of a new operating system called MB.OS.

MB.OS is a fully comprehensive architecture covering electric and electronic hardware, as well as software, which will hit the road in 2024. It can be seen in the VISION EQXX prototype vehicle.

As part of our partnership, we're also upgrading the Hey Mercedes personal assistant's intelligence and interactivity into a 3D Star Avatar that will be more akin to a digital butler. Additionally, the MB.OS system will allow for 3D navigation that can zoom from satellite view down to 10 meters.

It will also account for what time of day it is, ensuring an accurate real-time 3D display. Also, in March, we announced how Zutari is changing the way that large-scale solar projects in South Africa are designed, created and operated.

Zutari is using Unity's real-time 3D development platform to automate large-scale solar photovoltaic projects to reduce the time required to develop design level insights and decrease costs.

Not only does Zutari complete sun tracking and shading for each solar panel, but they also optimize solar sites to optimize the number and position of the panels installed in order to increase energy output, all within Unity. Zutari is also using Unity to explore additional sustainable energy facilities.

During Q1, we also achieved customer wins with our Digital Twins solutions across several new categories.

From one of the largest energy companies in the world that is deploying our Digital Twins products across the enterprise to run their own downstream operations more effectively, to an iconic luxury brand that is leveraging Unity to bring to market a differentiated digital experience that can only be done in real-time 3D.

Lockheed Martin is a model example of land and expand in action. Our first project with them started in 2017 when they bought a few seats for design visualization. Within 12 months, they had deployed 132 licenses to develop more interactive experiences for product development.

Five years later Lockheed has nearly 500 licenses across nine business units for multiple use cases including simulation, training and guidance and collaboration. We are also making a difference in enabling how creators work. Parsec and SyncSketch are becoming critical tools in the hybrid work world.

Creators need effortless access to high fidelity workspaces and the ability to collaborate regardless of their location. The average time spent on Parsec per Teams' customer is more than 27 hours per week. This is what hybrid work looks like.

Creators shift back and forth between direct access to powerful machines and remote to virtual access all without skipping a beat. The fact that we see incredible numbers and growth in such high sustained usage is a signal of the future that creative work requires.

As you can see, we are making good progress enabling creators across industries to adopt real-time 3D. I've never seen such a global surge in creative innovation in my career and we are honored to be powering much of it.

We're seeing this innovation in gaming AR and VR and in many non-game verticals across thousands of projects that are created and launched on Unity every day. I want to reiterate my expectation that Unity will sustain and sustainably grow revenue at or above 30% per year over the long term even as we gain scale.

I say this in full recognition that we're presently experiencing a self-inflicted challenge with our Modernization business that we expect to correct learn from and build a more resilient platform for the future.

As we expect to drive 30% revenue growth while achieving strong levels of profitability, but the $110 million revenue impact on our revenues this year hurts. We've been deeply considering ways for us to realize our vision on less more focused spending. We can.

We can make Unity a stronger company with this tighter focus and with it a faster move to profitability than we previously promised. We remain hugely focused on the long-term and these adjustments will make us stronger and leaner as we lead to the future. Luis will provide more details on this shortly.

And when I say focus on the long term, this is what I mean. Unity's Operate business lives in an exceptionally large market. We have a material data advantage in our monetization business continue to gain share with UGS as well as our hosting capabilities and believe we are more focused on gaming than our competitors. These are real advantages.

And Unity Create is now hitting an inflection point that we have long anticipated. We were not only growing our gaming footprint and take rate we are seeing strong adoption from industries beyond gaming. The tech industry sees waves of innovation from personal community, to Internet, cloud, online retail.

Today, we're in the foothills of another big wave. This time the way people interact with digital content. We call it interactive real-time 3D. Others call it spatial computing or more recently, the Metaverse. Whatever it's called, it is different, it is more engaging and it is inevitable.

We are beginning this journey with substantial market share leads. Over nearly two decades we have built a strong product and engineering-oriented team and business model that has let us earn the industry's larger developer footprint by a very wide margin compared with others in the space. We are selling into large and growing markets.

Our digital core market of gaming could double in five years to more than $300 billion as it touches most people on Earth. And our opportunity in the gaming space is not just to double more like five to 10x as we grow into the largest user group artist and build out more ratable consumption-based services to augment our SaaS subscription.

Meanwhile, other industries are just catching on. We have exciting momentum in Digital Twins, which boiled down will basically be the real-time digital replica of most places, objects and persons on the planet. And when I look at projects in our development pipeline, I see more opportunities with the potential to scale to multiple billions in revenue.

Non-gaming verticals have now gone at Unity from theory to early traction to scaling. We have to execute to earn our future opportunity. The challenges we discussed today will be addressed and resolved. It is not an industry or sector issue. We are well underway towards recovery and building and adding resilience and redundancy.

And since all of you on this call have to publish your models, the question becomes exactly when Operate will recover and what that trajectory will look like. It is always harder to forecast to change the trajectory than a continuation of one. Our guidance reflects our best estimate of that curve. And with that, let me turn the call to Luis..

Thank you, John. Let me frame a few considerations to understand the first quarter financials and balance 2022 guidance.

The challenges that John described for Unity Operate business negatively impact our first quarter results and are expected to negatively impact our business in the second and third quarters, with minimal impact to the fourth quarter. I would provide further details in a minute.

In the first quarter of 2022, we delivered revenue of $320 million, up 36% year-over-year. Create performed strongly, with revenue of $116 million, up 65% from a year ago. Operate softened, with revenue of $184 million, up 26% year-over-year. Strategic partnerships and other delivered $26 million – $20 million in revenue, up 11% from a year earlier.

We delivered at the high end of our guidance range with Create's over performance partly offset by softness in Operate. We continue to make progress in expanding our business and adding new customers to the Unity platform. At the end of the first quarter, we had 1,083 customers with trailing 12 months revenue above $100,000.

This compares to 837 customers at the end of the first quarter of 2021, an increase of 29% year-over-year. In addition, we delivered another strong net expansion rate of 135% on a trailing 12-month basis this compares to a net expansion rate of 140% a year earlier.

Our performance was fairly balanced by region with year-on-year revenue growth of 30% from the Americas, 34% from EMEA and 47% from Asia. Our non-GAAP gross margin was 76.2% down 210 basis points year-over-year, mostly as a result of including the additional engineers supporting Weta FX in cost of goods sold.

Excluding this impact, non-GAAP gross margin would have been down 70 basis points year-over-year, mainly due to mix. Non-GAAP operating expenses in the first quarter increased 29% as compared to the first quarter of 2021. This compares to 36% year-on-year revenue growth.

Our sales and marketing expenses in the first quarter, include the cost of the in-person game developer conference, which we did not have last year. Non-GAAP operating margin improved from minus 10% in the last year's first quarter to minus 7.2% this quarter.

Cash flow from operations was $101 million, which includes Weta FX's $200 million subscription payment covering four years of license. We had 348 million fully diluted shares at the end of the first quarter and 5,864 employees, up from 4,389 a year ago. Moving on to guidance.

Our original revenue guidance for the full year of 36% year-on-year growth at the top end of the range considered fairly even growth in each of the four quarters. As John mentioned earlier, the challenges we're having now with monetization represent a substantial short-term headwind to our revenue growth.

We quantified this headwind at $110 million with roughly 60% impacting the second quarter, 30% impacting the third quarter and 10% the fourth quarter. The recovery substantially rephases our year from being fairly even quarterly year-over-year growth to a year that is both front-loaded and back-loaded.

For the second quarter, we expect revenue of $290 million to $295 million, representing growth of 6% to 8% from last year's second quarter, which was our strongest quarter last year with 48% year-over-year growth. For the full year, we're lowering our guidance to $1,350 million to $1,425 million. This implies 22% to 28% year-on-year growth.

We're widening our guidance range to reflect different speeds in the monetization recovery. As mentioned, our modeling assumes partial recovery in the third quarter and to be largely back to our prior trend line in the fourth quarter. With our revenue coming down for the year there is, of course, an impact on our operating margins.

This is not new to us today. While we believe Unity has massive opportunity in our future, we also think we can realize our vision with less spending. We have looked hard and can reduce our spending by over $100 million versus our internal plan. We believe this will make us a stronger company short and long-term.

These savings will not have much of an impact in our second quarter but will have a substantial impact on the second half of the year such that we believe we will achieve profitability in the fourth quarter of this year, which is sooner than previously communicated. We expect to be profitable for the full year 2023.

As a result of the slowdown, we expect non-GAAP operating loss in the second quarter between $62 million and $64 million. For the full year, we expect non-GAAP operating loss between $60 million and $75 million. We continue to invest to capture the large opportunity in front of us as we lay the foundation for the next 15-plus years.

Yet, we have adjusted the pace of our investment given the slower revenue ramp to protect our margins. We expect 350 million fully diluted shares by the end of the second quarter and 356 million fully diluted shares by the end of the year. With that, I will open the call for questions..

Great. Thanks very much. So we'll go around as before. We'll call on the different analysts. And if we have time we'll also do virtual hands up. So why don't we start with the first question Kash Rangan from Goldman Sachs.

Do you have a question?.

Sure. I don’t know if you can see my video if not -- okay, so audio is fine. Thank you so much for all the perspective behind the issues in the quarter.

John, my question for you is can you talk a little bit about the cadence of Apple's privacy changes starting from when they implemented it to today? And what impact that might have had on the Pinpointer tool? And in regards to that if that is the correct hypothesis, what remediation tools are you offering to offset that headwind? And also maybe it's a little bit looking out but as you look at the WWDC if you were to make further changes by making private relay a default option, how are you prepared to handle any potential impact? Thank you so much..

So Ingrid is on with us today, but I'm going to give you one quick headline. We're well aware of Apple's plans where we provided our original guidance. So the change in guidance is not based on a change understanding of what Apple is doing. But Ingrid's here. It's her business. I will let her address your questions more specifically.

Ingrid?.

Thank you..

Yeah. Hi. Kash. Just want to be clear that the issues that John outlined today has -- is not as a result of iOS 14 impact, those are two different issues.

And then, as for iOS 16 and the outcome there, we've seen several media stories that, speculates what you just mentioned for the privacy changes could be coming in iOS 16 and that privacy relay could remove the use of IP addresses. However, Apple has not announced any details.

And today, we are actively working, to make sure that our systems are ready for start and prepared for the different possible outcomes to address any changes in the privacy landscape..

Great. Thank you so much..

Great. We'll go to the next caller. Matt Cost at Morgan Stanley.

Matt?.

Great. Thanks for taking my questions.

So when I look at sort of like the cadence of growth that's implied by the new guidance, assuming it kind of accelerates as we move through the year, it's something maybe like from $295 in 2Q, maybe adding $50 million and maybe $100 million in 3Q and 4Q to get to the high-end of the full year guide just round numbers.

I guess, when we think about what precipitated the issues with Audience Pinpointer earlier in the year, what gives you confidence that that pressure will abate so quickly? And you'll be able to step-up kind of so rapidly over the course of the second half of the year? And then, I have a follow-up. Thank you..

Sure. So I'll take a high-level. Ingrid, you may want to add some value. It's up to you or for Luis. We spent a fairly substantial amount of time, as you might imagine understanding exactly what happened. We've got deep insights into each of the component parts. And it gets divided over correcting problems that we're in the process of completing.

So we're well through a fair amount of the work it takes to address the problems we've outlined. And then, one of the things to keep in mind as well is for the past years we've been meeting or exceeding our numbers. And a major part of that is attributing revenue to new features and new performance enhancements. We've been very good at that.

So the corrections are like the inverse of a performance enhancement. And we still have the feature map that we've always had. And so, it's really just drilling down and doing what we've always done for our forecasting. But this time around if you will it's almost like a feature to correct the problem, because it has the same impact.

The value of an install is more carefully and correctly understood. Reaching more users through our Pinpointer tool is another example. We know how that math works.

Ingrid, anything you might want to add?.

Yeah. Matt this is the nature of machine learning-based products. We expect our recovery to go through several steps, in the sequence. The first is data rebuilding. The second is model training. And this is an iterative process that will drive better performance.

And the third, as our customers experience these improvements they will scale up their, spend and monetization with us, we will then see the impact on our revenue. So these changes are incrementally built upon one another, as each step in this progression is the foundation for the next.

And, look, we're building this business for the long term, because we truly believe in this sector. The games advertising market, as John mentioned, will continue to grow. We have highly engaged players and professionally created content. This will always be attractive for advertising.

And we know what we need to do to address this temporary challenge and we need to go through the motion to ensure the solid foundation. And lastly, what I would mention is that, the beauty of this business is that no customers have a loss and the sales cycle is short.

And for many of these developers, Unity has enabled them to achieve their vision and build the business that they have today. We have built a trusted brand and a reputation over the years such that when we deliver value we are confident that they will scale up their business with us again. .

Great. Thank you. And then just, on Operate, I think in the prepared remarks you mentioned basically an idiosyncratic issue in 1Q in a market, that is otherwise healthier or stable, I forgot the exact wording.

But, I guess, when we think about your expectations for the growth of like the mobile game advertising market through the end of the year, are you assuming relative stability through the end of the year, or is the market backdrop that you're imagining in your guidance including any impact of some macro weakness potentially?.

So it's always difficult to be exactly precise on what happens in the macro world is, arguably more going on in the macro world today than there has been in a long time. I don't see any long-term impacts on engagement and the overall health of the monetization business with large or with small onto Unity as we recover.

So we're expecting relative stability. And let me give you a little bit of my long history in the game industry. Through virtually every major crisis, the game industry has grown. Through recession, the game industry has grown. Through catastrophes like 9/11, the game industry had strong weeks immediately following.

It is what people do when they're frustrated. It's what they do when they stay home because they can't travel. It's what they do to fill their time when they're stuck at home with COVID and it's the habit they pick up and they carry with them.

Can there be uneven quarters from time to time? They can, but they're exceptionally rare in the gaming industry. And it really is the habit that people pick up and maintain once they start. And it's one of those few things where, when people come under more pressure and more stress, they tend to gain more.

So, again, I'm highly confident that this industry is strong. Can things get knocked back and forth in the quarter? Of course, they can. But the trend lines of the industry that we look back more than decades now, has been pretty consistent up to the right, no major retrenches.

Now, in years past, when we had primarily physical media in the gaming industry, you saw some cycles where the console business would go backwards in the year leading to do console launches, because customers would wait to get their new console and buy more discs. That phenomenon is trivial now.

What happens today is increased growth based on new users being more engaged over time..

Great. Thank you..

Thanks so much. Brent Bracelin at Piper..

Good afternoon. I wanted to go back to the Monetization challenges you're seeing. I guess I'm a little surprised to think about one customer and data from one customer having kind of this big of a challenge.

So maybe just stepping back how dependent is the Operate business on data from your other customers, or is this data from a third party that you're getting to help drive the service? Just a little more color on kind of how data from one customer could have this big of an impact on the business here just this quarter?.

So Ingrid, do you want to take that? I can add..

Sure. Brent, I just want to make sure that we are clear. It is -- the whole impact is not because of this one data from the customer..

Okay..

There were several factors that was outlined. The first was a fault in our platform that resulted in reduced accuracy for our Audience Pinpointer tool. As we grew significantly last year in Audience Pinpointer, as John mentioned, we paid more attention for growth and new features versus resiliency.

So this was an expensive issue given that Pinpointer is a big component of our business post Apple's privacy changes. The second....

Just to be clear though is that Pinpointer product did data dependent, or is it actually like a software bug issue that caused the problem? I'm just trying to dissect is it data challenging -- a data challenge, or is it actually a software bug issue?.

So the first component that I just mentioned is -- I wouldn't say, it's a combination of different things that reduced the accuracy for our Audience Pinpointer. And the second -- the second factor that we experienced with several incidents that impacted our data set that is an input to our machine learning, model training for Audience Pinpointer.

And one specific example of that -- exactly is that we set a large amount of that data from a customer..

It felt a little bit like it was one customer dataset. It sounds like there's several factors that had an influence on the data training issue and then there was obviously something that also impacted the Pinpointer product. My last question maybe for Luis.

As we think about the guide for Q2, you talked about some of these challenges cropping up in February and March. It looks like the guidance implies about a $60 million drag to operate for Q2 that's $20 million a month.

Why would it be such a bigger impact if you saw some of these initial impacts in February and March for Q2? It seems like it's a more material impact clearly for Q2 than what you saw in Q1, why is that?.

Yeah. So it's just the timing. So in January we started very strong. As John mentioned the impact to February was relatively small the impact to March was larger. So you see a partial impact in Q1..

Got it. So it's not like the issues are worse. It's like you're addressing most of the issues in this..

Yes..

Helpful color. I’ll see in floor..

The next question from Dylan Becker over at William Blair..

Yeah, hey guys. First maybe I wanted to touch on the value of the Create platform so an area that obviously saw a lot of strength and continues to see strength here.

But as you guys are thinking about kind of the confidence in this ramp throughout the middle quarters of the year and into the back half how much of that activity on the Create side and the insights and the data that you're able to draw from that tool gives you the confidence and support as we think about the ability to kind of retrench a lot of these models from a user targeting perspective? And then I have one more follow-up to that..

Marc, do you want to help with that a little bit or I can take it? Marc?.

Sure, I'm happy to start. I think the question was a little bit about how the flywheel between Operate and Create.

So what's been awesome, in particular in the games is that, our Create tool set is used by an incredibly broad set of creators across pretty much every platform where users are found and as those creators are going to market a huge number of them then onboard into the Operate tool chain.

Now, because we start from the very beginning from the very first time that someone hits file new project inside of Unity we start sort of understanding where they're going we're able to sort of work with them work with them at a Teams' level, and then move them over on to the Operate platform.

The other part that we continue to strengthen together is the work between, that Operate has been doing and what they call Unity Game Services, where it's not just the Monetization side but also the other areas around analytics around voice and multiplayer around sort of cloud content and delivery that ties in very deeply into both the creation and in the long-term operation.

And then Ingrid, I don't know, if you'd want to add anything on that on how that helps from your data perspective..

Yeah absolutely. So as we've seen as John mentioned, since beta launch in October, we've seen more than 74,000 organizations sign up with over 68,000 completes which is more than a 90% conversion rate. And all of that doing beta is coming from the Create platform and Made with Unity developers.

So, to just give some data points to support Marc's narrative there, we are seeing the impact on this, particularly on Unity Gaming Services. .

Can we get into your question exactly because I interpreted the question slightly different than we answered it. I want to make sure we're answering your question. .

Yes. I mean I think from a high level right it's around how the Create side can service that on-ramp from the operation monetization dynamic. And as you guys are kind of trying to again figure out and dig into to better optimizing some of these models. I think, that that helped address it from a high level and maybe a quick follow-up too.

So seeing kind of the strength I know you mentioned on the Digital Twins side, but like the interoperability of visualization here too as we think about seeing kind of traction and expansion into some of these nongaming use cases how should we think about maybe areas that are seeing the most momentum? And then maybe the opportunity to drive Operate strength outside of kind of the core non-gaming component today? Because I think a lot of the momentum you see is solely and creates the ability to kind of leverage the Operate side of the non-gaming component as well.

Thank you..

Sure. Why don't I start with that one and then John, I don't know if you have something to add. But I think it's a really great question. Digital Twins I think we're seeing really broad growth across multiple sectors as we see industries kind of using these Digital Twins to manage their business at every phase.

We see them using it at content creation and injection time to product configuration and sales collaboration, and then really deeply around management operations and simulation. And you can look at that across whichever industry that you want to look at they tend to be focused across those different phases.

Today, we've been and we continue to be strong in areas like architecture, engineering and construction, manufacturing, automotive, but we're also seeing a lot of significant growth in areas such as high end and luxury and retail and also in complex products.

I think everything from elevators to boats and sort of, being able to build systems that support both the on-ramp of new customers through the operation of those products.

What's been very encouraging is that where we see our customers is they begin – they are beginning to staff dedicated engineering teams in these areas not just asking for professional services. And so what we see is that they see digital twins not as a point engagement a onetime thing but as a continuing capability.

And that really speaks to how you think about not just the creation of an original digital twin, but its use over a lifetime to operate capabilities and the opportunity to create services and value add on that long term. .

So let me add a little bit to this one. So starting point, our company is born in the game industry.

And we're very -- we're -- I can't tell you how much energy goes into doing an awesome job for game developers which is why you see over the last handful of years we've gone from nowhere to market leading on all the consoles from nowhere to market leading on PC. And from low double-digit market shares in mobile to over 70% in mobile.

So huge energy around that. And now we've got all of the stuff we've been talking about with artists and new services increase our take rate. So that's underway and nothing is slowing that down.

Five years ago about I don't know eight blocks from here I hired somebody the first person that was going to work on a business outside of gaming just five years ago restaurant half a dozen blocks away. And I was describing something that might be true.

And what was fascinating about it is I was able to hire this guy but it was fascinating that I kept coming up with examples and I said, you're dreaming. It will never happen. From that point five years ago, we went with our public offering to less than two years ago.

We talked about this and we were getting with the time we talked about hundreds low thousand customer base and starting to get there. We didn't -- we called it early traction. I've never seen anything like this as I have in the last six months. I meet with customers every week.

CEOs, Boards and Directors in the auto industry architecture industry construction industry retail literally a spectrum of companies across so many industries and we're talking about companies huge organizations. And it reminds me ever so much of 2000. I remember in 2000 we thought what 5% of companies would have a website maybe 10% someday maybe.

Literally every company in the world has a website today. It is endemic to running a business to be able to find your customer through the computers.

Today what I'm seeing is similar traction around essentially what they're thinking of as the metaverse, but what that really means is the next version of the Internet that allows them to do things like virtual try-ons, bring their boutiques into your home.

It's a real-time 3D customer connection for complex products, for simple products, for fashion products, for technology products. And when we talked about it at the IPO it was interesting and we had good stories to tell. But this is -- it's changed a character in a pretty dramatic way. It's not just leaning in, it's jumping in and setting up camp.

They all know they need this and it is coming in a huge way. .

Great. Thanks guys..

Thanks. Appreciate it. Next question Andrew Uerkwitz at Jefferies. Andrew? There we go. Okay. Andrew, we'll circle back to you. Stephen Ju over at Credit Suisse, do you have a question? Thank you..

Yes sir. So I just wanted to circle back on Pinpointer. So it looks like a product that helps app developers reengage users who have already installed the app.

So can you confirm that this is indeed the case? And if so can you talk about what kind of campaigns were impacted in terms of different buckets of what advertisers are looking to achieve? And also secondarily, was this a problem that was presented to you by your advertisers were starting to report compressing ROIs and therefore starting to rotate budgets away from you? I'm just trying to figure out like how this problem was identified in the first place.

So in terms of the practicalities of getting the budgets back on board, is this a matter of just training your models to ramp ROIs back to where it was in the first place? Thanks..

Yes, Ingrid..

So Audience Pinpointer is our user acquisition product our ML-powered user acquisition product that allows game developers to acquire players based on a target return on their spend. So we have different ways that advertisers can buy. One is with a return on app spend target.

Another way is a target price per install for example and we have other factors like retention, et cetera, that they could buy on as well. So just to clarify, it's not a retargeting is what I think you mentioned. This is all user acquisition based on return on ad spend.

In terms of how the problem was identified, it was a combination of factors between -- we saw data our own customers' data, as well as our own data, and our engineering team looking at the root causes and finding those issues..

Okay.

So presumably on a go-forward basis, would you have access to less data that would be informing, I guess, the models? And would you anticipate that the ROI is using Pinpointer would be better or worse versus where you were before?.

Yes. As I mentioned the recovery will go through several steps. The first is data rebuilding. The second is model training and this is an iterative process. And as we train the model more the performance will improve.

And the third is then as the customer experience, these improvements they will increase their spend and monetization with us, and that's when we will see the impact on our revenue. .

And just for clarity we didn't lose any customers. And one of the early signals we saw, was we saw less revenue. And so they're spending less, because they're getting less performance out of Audience Pinpointer.

Ingrid's team took that apart, and I saw a multi-variant analysis showing each individual component part and that was driven in part by some of the data issues we talked about. So the diagnosis is crisp.

Those same advertisers when they start to see the performance that we know we can drive as new data fills in and we train those models, it's a straightforward process of bringing them back up into their share of wallet. These people are really data-driven.

For those of you that work in other industries primarily or have worked on other industries, there's almost nothing like the data-driven nature of a user acquiring marketing team in the game industry. These guys move on tenths of a point in one point.

And we know what we can do in performance, which is why we're able to confidently give some good sense of how this will come back. We saw how it went. We know how it comes back. .

John, this doesn't take away from the breadth of data sets that we have to inform our contextual data. It's just we have some challenges and issues as a result of these temporary technology issues and reduction in data. But in terms of the fundamentals of kind of the breadth of data that feeds into our condition this doesn't take away from that. .

This is -- I don't know, but I can say this with enormous precision, but in an industry like this one the data you build over the last 90 to 180 days, is the majority of the value you ever have from the data. It is recent data. So, this is one of those situations where self -- in a way it's just sort of self-correcting once we fixed the issue.

Now we're being more aggressive, in self-correcting. But it is one of those things where it's easy to draw the wrong conclusion. But this -- and so the revenue issue that we picked up was, related to the misses that we've talked about in terms of hitting us directly, but time to rebuild and then the rephasing of features.

And we're pretty confident of those builds. .

Thank you..

Great. And our last question Parker Lane [ph] with Stifel.

Are you available?.

Yes. sorry –.

Yes. Go ahead. Yes, got you..

John, I wanted to talk about the opportunity outside of gaming. You touched on it briefly a couple of questions ago, but I'm just thinking about the way that these organizations across a variety of industries think about their investments and innovation in real-time 3D.

Is there anything uniform, about that, or is everyone really taking at a different pace? Like, when we think about the customer expansion opportunity there, is it perhaps many factors larger than what you would see with traditional gaming customers, on the Create side?.

So there's a lot of pattern recognition you can talk about here, and I'm going to ask Marc to build on this.

But I'm going to give you one part of it, almost an organizational level one, and I'm going to ask Marc to talk about some pattern recognition around whether it's simulation centered or it's configurators, or it's reaching their customers with a new presentation.

One of the things that I've seen, is if I go back to five years ago, and I mentioned this before I talked to my first person into working on this business three years ago, I'd show up with a customer and we'd get handed off to a relatively junior person in the organization and three engineers, one of whom has a kid that programs in Unity, they're just curious to meet us.

And we'd show up and we'd say "How do you do this? And how do you do that?" Whether it's design, or how to do your car configurator, I was shocked at how archaic some of that was. And there was nobody very senior in these organizations that we were interacting with. That started to change about three years ago.

We were getting into important people in the marketing or design, or in different parts of the processes of those organizations.

Today, what's happening, it's CEOs accompanied by their Boards of Directors and their entire senior management team say, "I know I've got 10 experiments with you at a low level, we want this to be transformative." So one really significant point of pattern recognition, is where this has evolved to and where they get resources from, which is why I'm very confident that we're in the scaling phase and we've moved well into that.

I'd love to talk about a number of specific, but I'll take the air from Marc and I'll let him expand on that. .

Sure. Thanks, John. Yes I think there is some really interesting patterns that are relatively common across industries. And then you can also see, where there's a lot of growth to come. Many industries create at least in some level in 3D. They use CAD tools. They create their manufacturing, or their designs in some sort of 3D package.

For many years, those were then sort of transformed through their own process and then someone would come with a camera, and take photos of the final product. And if you wanted to show a different configuration, they take photos of another product that was configured differently.

Because the data from that sort of core engineering component didn't easily flow to where customers were or where the use case need was over the long-term.

So what we see is there's a very common pattern, where these companies want to ingest the huge amounts of data that they have in 3D, which by the way can in many cases be much larger than the content even in large games, in terms of polygons, in terms of meshes or point cloud data, when they're looking at sort of what they have.

They want to take that. They want to be able to easily configure it not just at an engineering level, but at end customer or product marketer level. They want to be able to manage it across multiple streams. Take automotive as an example.

Many of the use cases that automotive has for the HMI systems inside of the car, they also want to work effortlessly on a customer's phone.

And so, the 3D capability to be able to transform from kind of static creation at the front end of a process, through every phase of creation, whether it's simulation, management, configuration, all the way to the end user following the exact same pattern that we've seen in games, which is customers want access to thing across the screens that matter for them, whether that's a PC, a laptop or a mobile phone or MDR.

And so when we look at what we can do to deliver on a bunch of solutions inside of Digital Twins, it's about enabling that easy flow of data and use cases across the life cycle..

And then just one more layer on patterns. One part of this is customers wanted to reach their customer and sell better. Configurators, 3D showrooms, virtual try-ons, they're trying to communicate better more richly, increase basket sizes and increase transactions. Other thing people are asking, of course they want to operate something.

They have a manufacturing facility. They want to run it in the Digital Twin. They want to run massive simulation in parallel with that to get 5% 10% or 1% improvement in efficiency and effectiveness. They want to run and test new configurations. And so it's an operating IoT-driven thing. And then another arena for this is design.

And by way of example, it's relatively easy to use Unity to put a car on a bridge and do what you could do in a wind tunnel, infinitely cheaper and infinitely better to run simulation around that and help inform their design. Another fourth area is people are using it for training. So a lot of training around this.

So operating something from an airport to a manufacturing facility reaching a customer for retail and helping them buy, these are all patterns. And so, we're getting closer and closer to being able to say the professional service component can shrink away over time. We'll still be doing a lot of professional services.

But these are increasingly products we can put in front of customers they can just use to do a lot of these things. But that's where most of the energy is going for the stuff. .

Got it. I appreciate all the commentary. Thanks again..

All right. Well thank you very much everyone. We'll be at conferences in June at Bank of America, William Blair, and Stifel and Wedbush and we may see you at those conferences. So until then have a good rest of your day. Thanks so much..

Thank you all. .

Thank you..