Jarrod Yahes
Thanks, Matt. I'm pleased to report that unity exceeded the top end of our guidance on all measures in the 1st quarter.
Revenue exceeded the top end of our guidance by 20 million, with adjusted EBIOc coming in 190 million above the top end of our guidance.
Growth revenue in the first quarter was 285 million, down 4% year over year, with revenue upside compared to our guidance, partially driven by an acceleration of the rollout of Unity Vector, where we're seeing better performance than expected at this early stage.
And create revenue was 150 million, down 8% year over year, driven by our transition away from the low margin professional services business.
Through this deliberate transformation, we've optimized our revenue mix, with high margin subscription business now representing nearly 80% of create revenue.
Our core subscription business continues to demonstrate strong momentum, delivering double-digit year over year growth this quarter, positioning us for sustainable, profitable expansion.
Turning from revenue to non-gap profitability, adjusted IBEA for the quarter was $84 million with 19% margins.
Adjusted EBEA margins expanded 200 basis points year over year in the first quarter, driven by operating leverage in the platform, and solid cost management across expense lines, particularly in GNA and sales and marketing, where total expense was down roughly 2020 million year over year.
R&D costs are up at $10 million over the last few quarters as a result of heavy investment in Unity factor.
We would expect those costs normalized in the back half of the year, as we transition away from running both our legacy and new unity and models in parallel.
Free cash flow in the first quarter was $7 million an improvement of $22 million year over year.
The first quarter is traditionally the most modest seasonally, from a free cash flow standpoint, given the concentration of pre-paids, personnel costs, as well as payments to the supply side of the grow network.
As we focus on driving per-share returns, in the 1st quarter, we've started to report out on adjusted EPS in our disclosures.
Adjusted EPS in the first quarter was $0.24, and investors should expect to see a sharper focus on minimizing shareholder dilution and stock comp expense, which came down nearly $45 million year over year as we left M&A-related vestings.
In terms of our balance sheet, cash at the end of the quarter was 1.5 billion, and debt was 2.2 billion.
In February, we priced a 690 million convert, and the offering was extremely well received.
The deal was upsized and priced with zero coupon, and a capped call with a capped price of $47.74.
We use the proceeds of the offering to repurchase $688 million of principal balance of 2026 notes, and effectively extend those maturities into 2030.
This transaction ensures that unity has the capital structure with a smoother debt maturity profile, and we now feel extremely comfortable with where we are from a financing standpoint.
With that, I'd now like to turn to guidance for the 2nd quarter.
We're expecting total 2nd quarter revenues of 415 million to $425 million and adjusted EBITDA of $70 million to $75 million.
And grow, we expect steady sequential revenues, driven by improved performance of unity vector.
This revenue growth is expected to be offset by declines in select legacy ad products in the 2nd quarter. However, as the performance of Vector continues to improve, we expect to see the overall growth business return to revenue growth, with the performance improvement from Vector outpacing any other headwinds we face.
In Create, we expect continued momentum in our subscription business across the gaming and industry verticals. However, we're forecasting a slight sequential decline in Create due to an expected runoff in non-strategic revenues.
Before turning the call over for questions, I'd like to extend a warm welcome to Alex Giamo, who recently joined Unity as our new head of investor relations.
And with that, I'd like to thank you for joining us on Unity's first quarter, 2025 conference call, and let me turn the call over to Alex so that we can take your questions.
Alex Giaimo
(Event Instructions) Matt Cost, Morgan Stanley.
Matt Cost
Hi everybody, can you hear me?
Alex Giaimo
Go ahead, Matt. Matt, we can hear you. Yeah.
Matt Cost
Sorry about that. Yeah, sorry. Great, well thanks for taking the question. I guess on the vector roll out, I guess if we could just dig down one level deeper there.
Are you seeing the customers that are on Vector respond to that 15 to 20% list in installs in IIT by by increasing their spend, and are you seeing customers shift overspend from legacy a products onto the vector enabled products, or is this a dynamic where you're kind of losing business on one hand but trying to offset it by growing wallet share and increasing spend to the people who are who are on the new product.
Matthew Bromberg
Hey Matt, thank you very much for the question. Good to hear from you.
The advertising business is a very competitive business, and there, which means there's internal competition and external competition. And I think the best way to think about it is not to TRY to get too cute. What's really important is that, Performance of vector is really positive. It's much more positive than than even we had expected, and it's driving rere return for advertisers. And what that means is, they spend more, and we're seeing across the broad set of our customers, we're seeing customers begin to spend more with us. As all of we're. Following, the company, folks in the, in performance-based advertising do not have fixed budgets. So they will spend up to the point they hit their rows targets and when we perform better and provide more players and more high value players, they spend more with us. And so, I would imagine that.
They are, customers are moving, budgets around all the time, but the point is that it's not capped, it's not a winner take all business, and so we're really excited about the broad growth we're seeing across our across the segment.
Matt Cost
Great thanks. And then on the subscription side, you noted kind of strong growth in the subscription revenue, you're seeing a lot of adoption of Unity 6, it seems, which is great. Is is this mostly being driven by people being customers becoming subject to the higher pricing on Unity 6, or is there a meaningful element of of subscriber growth in that subscription revenue growth as well?
Matthew Bromberg
You won't start. To see the impacts of some of the significant price increases that that we made recently until the back half of the year so that's that's not what you're seeing there, but you're seeing, both growth in the core business as well as some of the impacts of of some older pricing increases that we've made.
Alex Giaimo
Andrew Boone, JMP Securities.
Andrew Boone
Hi, thanks so much for taking the question. I wanted to ask again on vector. Matt, you talked about incorporating data across the unity ecosystem and optimizing performance. Can you just speak to the trajectory of the improvements to the model that we should be expecting for the back half of the year?
Matthew Bromberg
Yeah, I think, we're being prudent about how we're guiding this business, Andrew, just simply because it's a new, it's a new business for us. It's a new system. And we just, we want to be really, we really want to be thoughtful about how we think about it, as we go, which is why we reverted to quarterly guidance at this point. I guess what I can tell you is that.
It continues to pace out in front of our expectations authentically so that, as I said, we were able to pull in the launch of Vector by quite a number of weeks, which is going to have a positive impact on our business. It's just not one that we anticipated.
As the nature of this business, and you've heard me say this many times, is an iterative one. So, we, the business starts with small improvements, small daily iterative improvements, and then we continue to work on the models learn, they adapt. We find new sources of data for those models, and they get better over time and at some point, you see, you begin to see step change, functions.
We're sort of learning right along with our self-learning models. So what I would tell you at this point is that, again we're ahead of schedule we're seeing measurable increases of about fi as I said, about 15 to 20% both in the scale that we'll be able to provide advertisers and in the quality of the users they're obtaining and as a consequence, we have customers who were on a broad basis are beginning to spend more.
As I mentioned, in the preamble here, that's really positive, but what it's also doing is giving us the ability to go back and fully get into modernizing the whole advertising business. So, back to what Matt was asking, a couple of minutes ago. We're focused on really driving vector and vector revenues and if there's some movement of from one product to another inside, that's fine with us, but we're investing really heavily in the vector, business because we're very confident that over the long term we'll be able to fundamentally compete in a different way. And a couple of quarters ago when we were just beginning this build, there was, there's a lot on the line for us, and I guess what I just wanted to say how pleased I am and proud of our team that we've been able to deliver a brand new system that is now delivering measurable improvements for customers and we're just really excited about continuing to lean into that over time.
Andrew Boone
That makes sense. And then I want to ask the obligatory macro question. Have you guys seen anything to date and is there anything that we should keep in mind just given the spectrum of potential outcomes for the broader economy as we think about the back half of 25. Thanks so much.
Matthew Bromberg
Yeah, I mean, we're obviously really closely monitoring the situation as everybody is. We have not seen any noticeable impact thus far on our business from some of the macro factors that we're seeing out in the world. A couple of just notes on that.
The vast majority of our customers are obviously game makers. In general, historically, gaming has been relatively insulated from sort of macroeconomic moves. It's a very efficient and effective form of entertainment on a kind of per hour basis for folks historically, and so that may be part of it. The other thing I directed to is that The vast majority of our advertising spenders, for example, are promoting mobile games and principally free to play mobile games. So, if there is any product that one would expect to be resilient, in difficult times, it would be free mobile products. And, the last thing I'd say is that I'd reiterate.
The question, the answer from the question a couple of minutes ago, which is that, as long as we're dealing with advertisers we're spending on robots, so they don't pull back spend based on sentiment like a brand advertiser would, and so I think those are all probably partial reasons that we're just not seeing anything yet, but, we want to be prudent about that and we're obviously watching it very closely.
Alex Giaimo
Tom Champion, Piper Sandler.
Tom Champion
Hi guys, good good morning. Hopefully, you can hear me. Matt, I just wanted to get your perspective on the timing and sequencing of events here between Vector Legacy Unity and iron Source. What where are we in kind of the staging of this transition to vector to the extent you can provide some color on that and then how does that map to your R&D staff and resourcing, behind that growth and just maybe a broader comment on organizationally, do you feel like the company structure is where you want to be and in a good place to move forward.
Thank you.
Matthew Bromberg
Great, thank you so much for the question. I appreciate it. Yeah, listen, we've been really focused on making all the investments we need to ensure that that vector and the kind of fundamental power that that brings to our ad stack, is going to have everything it needs. And to enable that transformation, we significantly increased our investment across the board in machine learning. We brought in new leadership, we hired new teams, we're obviously allocating money to. The GPU and CPU resources and infrastructure and tooling, so we're making all the investments we feel that we need to, and that includes, as Jared mentioned in his preamble, some increases in cloud cost that we expect to normalize in the back half. But we feel really good about those investments and the impact. That it's having we also reorganized our go to market teams a while back, splitting our revenue organization into two global teams, supply and demand, to be able to provide focus on both some of the newer ad products that we have and also some of the more legacy ad products. But as I said also in, my opening remarks.
This, we're really focused on having the full advertising segment grow. I'm agnostic with respect to the how that, what that mixes, and I'm not going to be overly precious or cautious, in the immediate term about about trying to optimize that. We're structuring ourselves for swift, sharp, long-term growth. I'm sure there will be some movement of customers from our internal products, but the fact is that there's movement across the whole market, and that's what's really important. We're going to take hopefully as much share externally, if not more than we are going to take internally, and in the end, we're going to have, a fast growing a business and so that's sort of how we think about it.
Thank you.
Alex Giaimo
Brent Thill, Jefferies.
Brent Thill
Thanks, Alex. Welcome. Matt, if you can just maybe give us your mile markers for the rest of the year on Vector, what are the big milestones you would like to hit, through this year at a high level? And for Jared, really good margin upside, maybe discuss the the cost base and where you see the continued opportunity to drive, continued margin efficiency. Thank.
Matthew Bromberg
You.
Yeah, listen, I, the way to think about vector is that In in a way we've just begun, right? In some ways it's a sort of vector 1.0 is what I.what I've shared with you today is that we literally just completed the migration of, a couple of weeks ago, and we're now up and running fully for the first time in these models. It is the very early. Leaning for us on this, by definition this process is a process process of investment and learning, and we're going to continue at that process. So I guess the first thing I'd say is as I think about milestones is we are just very much at the beginning, and that's really important.
As I look forward to strategically, I think the, I guess what I, what I'd reiterate, and we've talked about this on prior calls is that we're not just an ad network.
We're a platform provider.
We're we have a first party relationship with all of our customers who are frequently building their games on our platform, as well as a direct connect to billions of customers through our own time. And it has always been our contention that that provides some fundamental advantages to us in this business. And the real upside for unity is as we begin to take advantage of those opportunities and those still sit out in front of us, not way out in front of us, but there are the kinds of things that in the back half of this year and into 26, the kinds of opportunities that will be really focused on. So, I guess the way I, we think about this internally is like, we're at the starting gate.
We're just beginning to run, and it's all in front of us. I'll let Jared pick up some of the, the cost commentary, but just to say as we mentioned that we do have some increased cloud costs in as we've been running the two models in parallel, the old model, the new model. And one of the advantages of sort of getting to the starting gate and moving is that we'll only be operating one model, which is really helpful in our cost perspective.
Jarrod Yahes
Yeah, Brent, we feel great about where we started the year with 19% EBD margins. There's a couple 100 basis points of year over year margin expansion. But as we think about profitability for the business, first and foremost, the priority is to be able to resource the business to accelerate the growth, particularly of our ad business. That's extremely important. As Matt pointed out, we are putting a lot of resources into Vector and Yeah, we think there's a great opportunity there. With 80% plus gross margins, there's a lot of operating leverage in our business. And as you've seen, as ad businesses scale, they can really drop that to the bottom line and significantly improve EBID margins over time.
We're being thoughtful, we're being prudent about the way we run and operate the business operationally. There's lots of opportunity for automation. We're taking a prudent approach to headcount, and we're rationalizing our software spend, which are all the things you'd expect us to do, quarter in and quarter out. But again, first and foremost, we think there's a great revenue growth acceleration opportunity, and we're making sure to resource that appropriately while keeping an eye on the bottom line.
Alex Giaimo
Parker Lane, Stifel.
Parke Lane
Hey guys, thanks for taking the question. Can you hear me okay? Yeah.
Perfect. Jared, I was wondering if you could deconstruct the sequential decline that you're looking for to create a little bit more, coming off a double digit subscription growth there, strong industries, momentum, pricing benefits, is it simply that the non-strategic revenues that are influencing that number down quarter to quarter, are there other things that we should be looking for that, would explain that away?
Jarrod Yahes
No, that's right, Parker. We experienced another quarter of strong double-digit, subscription revenue growth. Industry continues to grow at an accelerated basis. If you think back to the 4th quarter, we had about $15 million of non-strategic revenue that we disclosed. We also spoke about $30 million of non-strategic revenue for the full year, so a bit of a step down from the run rate, and you're really just, seeing some of that come off the business, in the 2nd quarter.
Parke Lane
Got it. Matt, maybe just to follow up on some earlier answers here. So it doesn't sound like there's a hard line in the sand for the transition away from the legacy models. Is that correct? You're you're kind of just waiting and seeing on the performance of vector as opposed to setting that date and that influencing the way you think about the cost structure in the second half.
Matthew Bromberg
No, I wouldn't, I, let me clarify that.
This cutover means that we will no longer be running the two models in parallel. So we do, we expect to see this cost, some of this, cloud cost come off in the back half of the year. You'll see the effectively, the additional cost that that we're seeing, you'll see that come out. So that just, I want to be super clear about that. Is it, is it principally that the cost piece that you're interested in?
Parke Lane
Yeah, I was just wondering if there's a specific date where you're, where you said this is when they'll no longer support or run the the legacy models or if it's sort of a moving target based on the performance of vector.
Matthew Bromberg
Yeah, no, with the, with the launch of vector that we've talked about today on the Uni network, we are now no longer running on legacy models.
Parke Lane
Got it. Thanks for the clarification.
Alex Giaimo
Clark Lampen, BTIG.
Matthew Bromberg
Guys hear me? Oh, now we got you.
Clark Lampen
Yeah, sorry about that.
I had 2 more on Vector. I'm just curious in Q1, did you see any pressure on Iron Source or Tapjoy or any of the legacy products, or is that something where maybe you're anticipating for a different reason in Q2 that that's going to materialize or there's greater concentration of resources now around vector and then, Matt, going back to the comment you made around data and ROA improvements, I'm curious. If you could help us understand how the data flow is going to improve potentially as vector continues to seize and the model evolves at one point you know you guys had sort of talked to us generally about cross stats as a product. I'm curious if that's something that you guys have revisited or in the process of sort of introducing and if so, could you give us a general sense for maybe what you'll have access to and how it could be creative?
Thank you.
Matthew Bromberg
Yeah, thanks, Kirk. I really appreciate the question. So let me take them one at a time. That you were right, your observation is correct. We are aggressively pushing resources into vector, both from a go to market perspective as well as a technical perspective, and that does have some, impact on the. Ads, business, in addition, again, the IS business and the Unity ads business operates in a free marketplace with every other, ad network in the world and so we hope in fact to move some share both from IAS and we are seeing some of that but.
We also, much more importantly, are expecting to share from others as well. So, and again also as we pro as we provide more return, we expect overall ex expenditures to be up with us. So, but there's no question that there is some movement inside those inside those products inside our ad segment, absolutely. In terms of your second question, You'll begin to see from us, beginning in the back half of the year, but then, continuing onward, a real focus on trying to bring to bear the additional insights that we have into consumer behavior on our platform and to bring that value to bear, not just for advertising customers, but also, for customers of our editor and engine. And what I mean by that is, the opportunity that we have to unlock across the company is this.
We have billions of customers who interact on our platform, and we have not historically.
Use that insight to develop really clear, valuable, insights at a consumer level as to who folks are and how they behave and to think about how we provide value back to our customers. Just let me give you an example from the create side and then we can move to the growth side. The vast majority of our big customers are operating live services with us, right? There's these are games with millions of players, and We can provide much greater insight to them on the behavior of those players, how they're passing through the game, what they're spending, why things are crashing, why the game might be performing better in one geography than another. All these insights that we have not yet begun to package and offer back to our customers. Again, that's an example on the create side that is going to enable them to fully optimize the live services they, that they're making with us.
At the same time, on the grow side, those insights and that understanding of life players obviously has an impact, potential impact on understanding how to better and more efficiently acquire the right kinds of players who are going to be happy inside the game, that you're building and we're going to convert well and and engage and spend over time. This is a sort of fundamental wellspring of insight that historic we've not brought to bear on either side of our business. It is our primary strategy. Again, you'll start to see this, in the back half of the year, but it's, it will be the work of the next several years in total. It's our primary strategy to deliver that value, which we think nobody else in the world can do, in, back to our customers.
Alex Giaimo
Chris Kuntarich, UBS.
Chris Kuntarich
Great, can you hear me okay?
We can get you, yeah.
Great, thanks. Just want to go back, to vector here and how it's going to play with iron Source specifically.
Urious if this better than expected progress that you're seeing today has changed how you're philosophically thinking about the need for for iron source as the network.
Matthew Bromberg
Yeah, so let me back up and offer a little bit of context. We're in the market with both our ad networks, the UN network and the source ad network, and, they are different and they offer different value to different kinds of customers. So on any one individual geography or genre of game or actual game, you will see different performance across different networks, and that's true not just of our network. But with all the networks in the marketplace, so we're currently really happy and and really proud of the of the iron source team and the network in terms of the value they're providing, and we're out in the marketplace offering both products to customers and we continue, we plan to continue to do that. And so I wouldn't think of this kind of as a zero-sum game in the world between the two networks that we own, I just, I don't know that that's the. That's really the way this marketplace plays out. We want all our networks to perform the best they possibly can and then customers will move spend, accordingly, across the whole marketplace. So, we're going to continue to operate in that way. As I said, we have 4 or 5 different ad products. They have, they provide different value to different sets of customers, and we're going to keep selling, those products really aggressively and happily.
Chris Kuntarich
Got it. And maybe just one follow up on gross margin. If I heard you correctly, you're going to be sunsetting the legacy, unity model here. So you're going to be running on one model for the entirety of 2Q.
Are there any puts and takes with some of the non-strategic revenue that's going to be coming off in two that would cause gross margin to be down sequentially from one queue?
Jarrod Yahes
No, I don't think there's anything, that we'd expect in that regard, Chris. I think we should expect a relatively stable gross margins into the second quarter, and, I think, there's no reason why the trajectory of our EBITDA shouldn't be, stable to to our current, IBEDA performance.
Chris Kuntarich
In the 1st quarter. Great. Thank you.
Alex Giaimo
[David Mack, Orete Research].
David Mack
Hi, thanks for taking my question. Just one more on Vector from me. Just really to drill into the detail on the timeline of these new vector-powered DSP products, is there a reason why there's no discernible financial impact quite yet? Maybe due to advertisers still testing, dipping their toes, needing sales support, for example, or is it more the case that these models still need to improve further? To be truly competitive on, say, a row as basis versus the other offerings out there and to have a short one for Jarrod as well after that.
Matthew Bromberg
Hi, David. Thanks for your call. No, I listen, I think it's just two things. One, it's still very early for us. So we've literally just launched these new models and we're just rolling them out to customers, but, and so there's a timing element here, but But to be really clear, we're already seeing better row as I said, we're seeing more installs, we're seeing at so we're seeing more scale and our advertisers are seeing better returns, but we're just at the beginning of bringing this to market, so there is a timing element as well. And then the second element is really just, and we've talked about it a couple times over the last few minutes is. There is some there are some internal puts and takes on the new unity ad network versus the iron source ad network as we've identified and we're investing really aggressively, and so we're going to see some movements there and so it's really timing and some of the internal revenue mix that that is masking some of that upside at this stage.
David Mack
Great, thanks. And just the one for Jara is just, are we able to just quantify the non-strategic revenue in the first quarter across create and grow and then what is embedded for each of those in the 2 Q guidance? I think you mentioned 30 million for 2025. Is this mostly in Q1 and then trailing off after that? That would be helpful. Thanks very much.
Jarrod Yahes
Yeah, David, there was about $17 million of non-strategic revenue in the first quarter, and our expectation of $30 million for the full year is consistent. And so yes, there will be a trail off in Q2 and beyond, and we'll see a bit of a step down in that regard. And I think the good news is that this has now become a small part of our revenues. It's under 2% of the company's total revenues. So it gives us the opportunity to be a little bit more clear and transparent and straightforward in our disclosures and really just talk about total revenue and growth and create and grow.
David Mack
Great. Thanks very much. Thanks, Alex. Welcome as well.
Alex Giaimo
Martin Yang, Oppenheimer.
Martin Yang
Hi, thank you for taking my question. My question is about subscription growth trend. Can you maybe talk about how subscription revenue was trending on a sequential basis and how do you see the key drivers for subscription revenue overall in 2025, both on the user and user per revenue perspective.
Thank you.
Jarrod Yahes
Sure, Martin.
Thank you so much for your question. So, subscription revenue growth in the first quarter was 13% year over year, so another, double digit growth quarter for us. We feel really great about the trajectory. There are several tailwinds that are driving that subscription growth. I think number one, you've heard about some of our success in the industry segment, Matt spoke about some of the new customer wins, in areas outside of gaming. So we're seeing a lot of new see growth and expansion in that area. We have very good efforts across the company in order to ensure that we're executing on our strategy around price improvements and we're seeing that start to flow through the P&L. That'll be a bit of a waterfall and so the impact of those price improvements will increase over the course of the year and we'll continue to benefit from that. But I think broadly speaking, we feel really good about the subscription being 80% of our create segment at this point and getting larger, that over time, there's the ability to achieve consistent double-digit growth in in creating.
Martin Yang
Thank you. That's it for me.
Alex Giaimo
Alec Brondolo, Wells Fargo.
Alec Brondolo
Hey, thanks. Can you hear me okay?
Yeah, we can hear you. Yeah, so, maybe first I would love to ask, what percent of growth revenue Unity Ad Network represents. I think what you guys are describing is there's a little bit of noise as vector improves the performance of the Unity ad network, but there's a little bit of noise as kind of maybe iron source seats some share as some of the other products fall off. Is there any kind of rough math or or rough mix you could give us to help us understand what percent of the base vector might be impacting?
Jarrod Yahes
Yeah, so Alec, while we're not breaking down into more granularity sort of the individual reporting areas of create and grow, what we can say is that Unity vector is by far the largest a product that we have in that growth segment. And we have a number of other ad products that are meaningfully smaller than that. So this is impacting a very substantial portion of the revenues, and that's why it's garnering the heavy investment that we're making. What I would also add is this investment that we're making Unity vector and this capability that we've developed in machine learning is going to benefit. All of the unity add products and grow products over time, and there's a tremendous opportunity to leverage some of the intellectual property and the capabilities that we've developed, and so we are focused on what is the largest area in our growth segment with the most growth potential, but we expect that to eventually trickle down and benefit the growth, segment in its entirety.
Alec Brondolo
If I can maybe follow up on that point, I guess it's clear that the first priority here was improving the performance of unity ads on the demand side. Could you maybe help us think about where level play, where mediation kind of falls on your list of priorities for the business, Matt? Is that something that maybe you want to improve in 25? Is that more of a medium term story? Any feedback that would be helpful?
Matthew Bromberg
Yeah, absolutely. Thanks for the question. To your point, our primary focus is on improving user acquisition both because we think that's the the largest opportunity for us in the immediate and the long term, but also because, strength and mediation is often a function of strength and user acquisition. So it's clearly the best place to start. But secondarily, I would say that We don't view mediation as as as strategic as maybe some other folks in the market to decide and and the reason is really simple. As I said many times before, we're not an ad network, we're we're a development platform and we have first party connections to customers and data, and so, while mediation is helpful, it is not the only source of that insight. For us and so while we're we're we're proud of our product and we're excited about about how it's operating, it's perhaps less important to us, than others and and as a consequence we're we're really focused on the, on the UA side.
Perfect.
Thank you so much.
Alex Giaimo
Bernie McTernan, Needham.
Bernard McTernan
Great. Thanks for taking the question. Just wanted to ask about just where the current performance of vector rates relative to prior peak performance levels for the unity and iron source ad networks, and I know it's a tough question, but how would you expect that 10 to 20% improvement to trend over time?
Matthew Bromberg
Yeah, I would I thank you for the question. I'd say this, you know.
Last weekend.
We saw some of the peak days for ads been that that we've seen in many years. So, Just at a at a high level.
The growth and the performance is encouraging not just respect with respect to where we were yesterday or the day before, but overall in terms of the trajectory of our business. And can you repeat again the second part of your question? I'm sorry. Oh.
Bernard McTernan
Yeah, no, just the 15 to 20% improvement that that you called out, how should we expect that to trend over time? He called out, marrying more of the data between create and grow, just, how should we expect that improvement.
Matthew Bromberg
Yeah, listen, I mentioned this a little bit earlier, but I, it's, it bears repeating. We are so much at the very beginning of this process. I mean, keep in mind, I'm what I'm literally saying to you is, we just launched this product.
So the fact that we're, and by the way, We would have launched the product if all it did was provide the same performance. We still would have launched it because we would want to begin learning as quickly as possible and because it's more efficient from a cost perspective. So, that was one possible outcome here. Instead, what we're seeing is much greater than expected performance, even really early on, but this business, the nature of this business is daily learning that goes on forever. So, I would, I hope that, this is, as we pull back the camera over time that this will be the low point of the performance of this business. It's certainly our intention and as I said, particularly with respect to some of the larger and more strategic opportunities we have that we've not yet brought to bear, we think there's a real, we think, there's a really exciting long term opportunity here.
Bernard McTernan
Great. And just one follow up if I could, just we know performance marketing budgets can can shift quickly and publishers are constantly evaluating, but that evaluation time, like, are we talking like days or weeks, just trying to get a sense given the platform is so new, kind of what the evaluation period that is on the other side.
Matthew Bromberg
It depends on the nature of the advertiser. I think it's important to remember for us that the vast majority of our advertisers are game publishers and developers who are who are purchasing based on return on advertising spend in their games, and different publishers have different time horizons that they're optimizing for. But, these are, there, these are long term.
Return-based advertisers, and, I wouldn't expect that when you see shifts, you're going to, you, you're going to see them, immediately or sharply.
Bernard McTernan
Got it. Thanks, Matt.
Alex Giaimo
Faith Brunner, William Blair.
Faith Brunner
Oh, beautiful. Kind of diving deeper on what you just said, but looking at your advertiser base, so you mentioned that those budgets don't really move the same way we would expect typical brand advisors. So any additional color you can add on the spending behavior and potential downtimes, and then maybe how vector layers and additional durability into that spend given the ROI you're seeing.
Matthew Bromberg
Yeah, absolutely. Here's the thing, I, and I, and believe me, I understand as well as the next person, some of the disruptions and frictions in the macro marketplace. The, for us, our performance is going to be principally driven by the quality of our execution. We're not generally speaking, moving up and down with macroeconomic trends. That's just not where we are as a business right now. So I can tell you that when we provide Meaningfully and markedly better performance, we see increased advertisers spend. As we increase that performance, we will see more advertisers spend. That's my expectation. We're seeing, we're already seeing that across a broad base of our customers. It's something that we've been seeing over the prior weeks, right in the midst of. Again, of all this macroeconomic uncertainty and friction. So that's the beauty of what we do is if we deliver, we we'll customers can see that, they can see it very quickly, and we expect over time for that, to trend up.
Chris Kuntarich
All right, great.
Thank you guys.
Alex Giaimo
Thanks, Faith. With that, we'll wrap up today's call. We want to thank everyone for joining this morning, and we look forward to connecting with you all in the coming days and weeks. Have a great day.
