Thank you, and welcome everyone to Unity's Financial Results Webcast. Today, we'll be highlighting our results for the fourth quarter and for the full fiscal year of 2020. With me on the call today is John Riccitiello, President, Chief Executive Officer, and Executive Chairman, and Kim Jabal, Senior Vice President and Chief Financial Officer. Now, one of our goals on this call is to help investors understand our business model, and we're going to try to do this in an efficient manner. After the close, we publish a shareholder letter with financial commentary and guidance. On this call, we will begin with brief remarks from John. We will answer questions that we collected and consolidated from analysts and investors. Finally, time permitting, we'll have the last 10 minutes or so for panelists to ask additional questions. Let's go on to the safe harbor statement. I'd like to remind participants that during this conference call, we will be making forward-looking statements, including our financial outlook for the first quarter and full year of fiscal 2021, as well as statements about goals, business outlook, expectations for future financial performance, and similar items, all of which are subject to risks, uncertainties, and assumptions. You can find more information about these risks and uncertainties in the risk factors section of our filings with the SEC at sec.gov. We remind everyone that our actual results may differ, and we undertake no obligation to revise or update any forward-looking statements. We will also be discussing non-GAAP financial measures today. Reconciliations between our GAAP and non-GAAP financial results and discussion of limitations of our non-GAAP financial measures can be found in our earnings press release. With that, let me turn it over to John for some introductory remarks. Thank you, Richard, thanks for joining us today and for your ongoing support. Today, we're happy to share our fourth quarter and full year 2020 results. I hope you've had the chance to read our shareholder letter, where we provided highlights for the quarter and the year as well as our 2021 guidance. We hope that you and your family and friends are safe and healthy in these challenging times. Our team at Unity, more than 4,000 strong, extends these well wishes to our customers, partners, and the end users of the products built with Unity and operated by Unity. We believe we're in the early phases of a once in a generation technology transition. In this case, a world in which the majority of digital content is two-dimensional and moving to real-time 3D. Those of you who have followed history of technology understand that revolutions don't happen organically. You need change agents. For real-time 3D, we're seeing a virtuous cycle of software and hardware innovation change agents. For example, faster GPUs, 5G bandwidth, 4K displays, and new XR devices are making real-time 3D from any endpoint a reality. At Unity, our software development platform and services is the change that lets creators build engaging real-time 3D applications and environments. We're privileged to lead in this new world and are investing to realize the massive opportunity we see in our future. We just reported a strong Q4 with revenues of $220 million, up 39% to prior year, and 2020 revs of $772 million, up 43% versus 2019. These strong results were a result of a combination of strong execution and the great work of our teams delivering innovation across the board for our customers. We also recognize that we benefited from some COVID-related tailwinds and estimate this contributed a net of around $25 million to our total revenues in 2020. In our shareholder letter, we included some statistics which speak to the growth of our ecosystem, including Unity's market share among the top 1,000 games, the number of monthly downloads of apps built with Unity, and the number of monthly active users that engage with content built with or operated by Unity. All of these metrics hit record levels, with our market share of the top 1,000 in 58 countries reaching 71%. Downloads averaged 5 billion times per month in Q4, and MAUs reached an average of 2.7 billion per month in Q4 2020. These record results don't directly translate to revenue in many cases, but they're indicative of the strength of our franchise and the ecosystem we support. We're thankful that our amazing customers are realizing great success in the marketplace. Now at Unity, good metrics and outcomes come from one source: innovation. At Unity, we expand the boundaries of innovation. In 2020, we delivered hundreds of improvements to our core Create platform, and our Operate team helped studios optimize for lifetime customer value with new services like Game Growth. We upgraded and introduced applications for our customers beyond gaming. For example, in December, we highlighted Volkswagen's innovative use of our vertical application Forma to build an engaging virtual e-commerce showroom. We're laying the foundation for a future in which most of the world's content will, in time, be real-time 3D. Today, we're also providing our guidance for 2021. We're projecting revenues of $950 million-$970 million for the year. This guidance takes into account multiple factors. I'd like to reference three. One, underlying revenue growth of +30%, which is our long-term goal. Two, the recognition that 2020 had somewhat elevated revenue due to COVID tailwinds. Three, the recognition that we estimate a one-time hit in 2021 of approximately $30 million to revenues, or just over 3%. As advertisers become accustomed to the new IDFA approach being implemented by Apple. We look forward to a strong 2021, knowing that none of this would be possible without the incredible, dedicated, and innovative employees at Unity. It's an honor for me to be part of this world-class team. With that, I will turn this over to the operator and Kim and Richard, and we will take questions. Great. Thanks very much. Why don't we start with a question on IDFA? Kim, do you want to get us started on that one? The question was, just so you know, because what we did is collected all these questions. Specifically, do we have any update on the expected timing around IDFA, iOS 14 changes? Have your views changed? What impact do we see on our business, and is that factored into our guidance? Great. Hi, everyone. Thank you for joining us today. With respect to IDFA, this is a question I think we got from all of you. The changes related to IDFA are going to require that our customers recalibrate much of what they're doing related to their acquisition, their monetization, and their marketing strategies. We've been working really closely with customers to help them do this. I would say that we've been preparing for this for a long time. We are leveraging our learnings from GDPR, from our contextual advertising product, which does not rely on the IDFA, and we're working hard to mitigate the risk both to Unity and to our customers. As John mentioned in our earnings release, we estimate that the IDFA changes will impact our revenue by about $30 million this year, assuming a rollout in the spring. This estimate is not a perfect science, but we have very detailed models that help us forecast the impact here. We leverage country-by-country data, including impression levels for iOS versus Android. We look at current and historic opt-out rates, the adoption rates of our contextual ad products, and our experience with GDPR. We feel pretty confident in our estimates here. Let me add a little perspective because I know this is a really important question in the mind of many investors. When we do a forecast, we're very analytical at Unity. For example, when we're trying to estimate revenue or, say, Create seats, we'll look at a customer level, an individual publisher. We'll look at how many teams are using our product, how many people on each team, the job classification for each person on the team that might or might not use Unity, individual features that help us understand what the uptake rate can be across those classification of users on a by team basis. It's on that basis that we formulate an aggregated forecast for the business. It's not entirely science, but it's really close. We're even better at that when it comes to the monetization and services side because we have a lot more data. In this case, I just want to give you a couple of highlights just to let you know. We did build our model up in a very detailed way. We have a handle on this. A point to start with in the beginning of the model is only about 30% of our impressions are from iOS. Many of these, a significant portion, have already opted out from limited ad tracking. We take data like that. We take information, extreme detail on our experience with opt-outs when people are presented with new user flows for a game or other application, and we build it up step by step. We have a good understanding. We don't know if advertisers are going to respond with incremental advertising spend to drive installs. That's a possibility. We can't quite get every last nuance in this, nor can we understand precisely what our market share offset will be. We feel confident that we're growing our advertising business with market share growth that's been going on for many years on the basis of strong data insights. Net, it's an estimate, but we're not guessing. We've got a very detailed model in place, and we think we understand where we're going. Great. Thanks. The second question is the thing that all of us had to deal with this year is about COVID and about half the analysts asked this, but Bhavan Suri asked first, so he gets a shout-out. Kim, the question is: how did COVID impact your 2020 results? More importantly, how are you thinking about the impact of a normalized environment on gaming as COVID recedes? Then more broadly, what is the impact you see from COVID on your overall business, particularly beyond gaming? Sure. As you saw in our earnings release, we called out a net $25 million of upside to revenue because of COVID, alongside $40 million in net expense savings after some reinvestment. We see less of an impact in 2021 related to COVID. On the revenue side, we're entering the year with lots of momentum across both gaming and new verticals. In gaming, we gained share in a market that experienced a trifecta of user engagement. We had new gamers entering the market, we had lapsed gamers coming back, and we had existing gamers playing a lot more often. As a result, as John mentioned, as you saw in our release, our monthly active users who consumed content created or operated with Unity reached an average of $2.7 billion per month in Q4, and that's up 63% year-over-year. Interestingly, new players we gained in 2020 had a 27% higher rate of in-app purchase versus existing users. These are new valuable users that are coming into the ecosystem. For 2021, our view is that this momentum and user engagement will continue even as the world hopefully starts returning to normal. Historically, this is what we've seen in the gaming industry, which is growing faster and is now larger than the film and music industries combined. We believe this is because a game is so much more interactive. You control the character. The next frame is something nobody's ever seen. Now with the increasing levels of network-based connectivity, you're also engaging with other players, with your friends. So we see a lot of momentum heading into 2021 in gaming. In new verticals, our year started out slowly in 2020 as companies adjusted to working in a COVID environment, but we ended really strong and have great momentum heading into 2021. In Q4, of our 793 customers with revenue over $100,000 a year, 13% of those were driving revenue for us outside of gaming. This is up from 8% just a couple of quarters ago when we filed our S-1. The other thing I would say on the expense side in 2021, we are assuming continued reductions in travel, facilities, and marketing event spend with some uptick by the end of the year. We're generally, though, planning to reinvest those savings into headcount and initiatives that will drive revenue growth across R&D and sales marketing. The last thing I'll note, an interesting dynamic from COVID is that it made hiring a bit more back-end loaded for some of our teams, and the start dates for many of our Q4 hires flowed over into 2021. We have a stronger than usual start for the year on our hiring. Over three-quarters of our projected headcount growth for Q1 is tied to offers that were accepted last quarter. We have a really strong running start, and this is reflected in our Q1 guidance for a sequential drop in operating margin. Great. Okay, let's move on to business highlights. Let's start with create for verticals. The first question there is from Mario Lu at Barclays, and he asked, "Can you talk about Unity Forma and what the opportunity set is for that product beyond the virtual auto showrooms and into maybe e-commerce site brands beyond Volkswagen? Sure. For those of you who don't know, we created and launched Unity Forma towards the end of last year. Let me just describe what it is for those that may not be as close to it. When a creator works in Unity, they're working in an enormously powerful tool. It's got pull-down menus that allow you to do content creation. There's hundreds of these pull-down menus within the editor, and for a professional developer, it's straightforward to use. For someone that's not familiar with real-time 3D content development, it is a chore. It can take a year or more to learn. We create these runtime applications so we can bring all that power to a user so they can get everything they need with four or five buttons. Easy to use, easy to roll out, easy to get new customers up on the platform. The first of the tools we launched that were like this was Reflect. We've seen really good traction with architecture and construction using that tool. We talked about that on the last call. Here we're talking about Unity Forma. Up until this point, the state of the art for most virtual showrooms or e-commerce was a few JPEGs and a video. They're really nowhere near what they can be. What Unity Forma does is it democratizes and enables business users to create engaging real-time 3D environments. We conceived of Forma for the challenges associated with manufacturing customers and consumer brands that want to deliver interactive marketing content, including product configurators. We've talked extensively about Volkswagen and what they're doing. Our first customers already include a luxury good manufacturer, a company in aeronautics, and a leading hospitality chain. We've really got it going on verticals. This is a way to really get people up on the Unity platform. Just in the last month, we've added Newell Brands, Walgreens, Liberte Productions, SHOWstudio, and Nick Knight. A lot of folks are coming onto our platform and verticals to take advantage of tools like Forma, like Reflect, and there'll be more. Great. Okay, staying on Create for verticals. Brent Bracelin of Piper Sandler asked the following question, and I can take this one. He said, "In some markets, it makes sense to go it alone. In other markets, it's better to work through channel partners or professional services companies. How are you thinking about your go-to-market strategy in other verticals like manufacturing?" The response really is, first off, it's a good question. Look, we try to start at the top, which means that we target the most innovative companies in the sector. What they become is beacons and reference customers when we shift from a land to expand model in a particular vertical. Our go-to-market motion depends on where the customer is in terms of embedding real-time 3D into their business model. That really means three components. Direct sales, engage our own in-house professional services, or work with VARs and channel partners. For example, on the direct front, we sell Unity Reflect alongside Autodesk's AEC platform. With Esri, we are providing a joint go-to-market strategy with them with geospatial and 3D technology to the Department of Defense. With Continental Elektrobit, our work is focused on in-car entertainment systems. Sometimes customers need help standing up a project. In that case, we either bring in our in-house specialists like Finger Food, which we have as our internal group, or we tap a growing network of value-added resellers or managed delivery providers. Let's go to the fifth question. Back to John. A couple of you had sent us questions about the recent hiring of Peter Moore. Maybe, John, you could talk about that new hire and any other announcements that we've made of late. Sure. We see the opportunity in front of us at Unity as just massively significant. We think it's a once-in-a-generation opportunity, and we're a once-in-a-generation company. We've signaled many times that we're investing to realize this opportunity. I'm really proud of the team at Unity. The team you saw in our S-1 and the IPO is, for the most part, the team that I brought on five and six years ago to take this company from the amazing start of the founders and a small team to what we are today. Part of my job is to make sure that the leadership team has all the capacity and capability to realize the opportunity in front of us. From time to time, I'm a bit like a football or a soccer coach. I make changes to win championships, and that's part of my job here at Unity. Now, with Peter Moore, we see a significant opportunity in the arena of sports and live entertainment. We don't have specific announcements to make today. Many of you probably know Peter. He's well-storied in the industry, and he'll have some things to talk about in future calls. I think it's also worth noting, we announced internally today, but not externally, that'll come in a couple of weeks, that we've hired Marc Whitten from Amazon to lead our Create Solutions business. Marc is an incredible leader in the world of tech and entertainment. He leads a large GM team at Amazon now. He's also essentially the founder of Xbox Live, there from the very beginning. Built a large organization that realized everything that is Xbox Live. He brings a lot to Unity, and his leadership will add to our ability to grow and grow faster in the months and years to come. There is always something going on at Unity, but in this instance, what we're trying to do is map to make sure that the opportunity is met with the ability to realize it. Okay, let's move on to Create for gaming. John, you can take this one. Ryan Gee at Bank of America Merrill Lynch asked, "Cyberpunk 2077 was a high-profile launch that was unfortunately filled with bugs, but CD Projekt is far from the only studio that's faced this issue. To what extent do you think this will be kind of a wake-up call, not just for AA A, but also pretty much everyone in the industry about whether or not to build bespoke game engines? This is my day-to-day life these days. Just as a background, I've been leading teams that build game engines going back to 1997 and been involved in the creation of over a dozen game engines, including leading the organization at the time that we created Frostbite at Electronic Arts. I completely get the allure of creating new technology if you're a game company. I think we've reached the point that it's probably a negative return on investment for most people to create their own technology. It's expensive, it's challenging to get to a number of platforms, and at times, it gets in the way of what consumers really want, which is great content, well-polished, well-finished, and bug-free. At Unity, we built a game engine that gives developers all the tools they need to create gameplay that works, photorealistic visuals on any endpoint, and a full suite of monetization, content delivery, and hosting options through our operate services. As you've watched us, our market share across all platforms has been rising dramatically in recent years and again, recent quarters. I think more publishers and developers are coming to realize the power of Unity. I think that'll continue. I think there's a lot of love for self-built engines, and I think over time, we'll see fewer of them. Great. We've got another one here for you, John. Tom Roderick at Stifel asks, "On the Create side, by our estimates, your addressable market, at least in terms of seat count for game artists, is approximately double that of gaming programmers. Could you update us on the progress you're making here with ArtEngine, but more broadly on penetrating this market? What's the competitive set? Is this a replacement sale, add-on sale, and who makes the buying decision? For the most part, when we're closing new seats on teams, it's artists. They come onto the platform in a pretty deliberate way. The first thing we've been investing in is better workflows. The Unity engine, the Unity editor, is a lot more intuitive for artists, and we've made great progress in that front. What I mean by intuitive is in years gone by, an artist would go to their programmer and say, "Hey, I've created this amazing file. Could you import it into the game for me? Can you integrate it into the game? Can you help us build these art artifacts of animation or other things?" In other words, Unity was too hard to use for them, as is any game engine. By enhancing the simplicity of the workflows, a lot of artists are able now to use Unity directly. Second thing we do is we create specific tools that enable the developer, the artist developer, to create directly in Unity without the complexity of invoking the more nuanced parts of the editor. These are tools like the VFX Graph, Shader Graph, some of our environmental authoring systems. You can work directly with the editor with the complexity removed. Here, what we're doing, and ArtEngine is among these, giving them enormously powerful tools that sit on top of Unity, they can get more with less complexity. The last thing we're doing is we're working hard on specialized tools to really help an artist feel like they're ten artists. ArtEngine is also part of this, but it's about allowing them to easily find, to the Asset Store or other services, assets that they can directly employ in the game without creating them from scratch, and tools that they can use to transform those to be able to be directly used inside the game. Inside the application they're building. We have a, if you will, a three-front assault on helping developers, particularly artists, feel much more productive and be much more productive. One is in workflows, make it simpler with the core engine. Other is tools to advance them without the complexity of the editor to be able to do things in a productive way. Third is to bring assets directly to them so they're not starting from scratch. If it were a baseball metaphor, they're starting on third base. That's the notion, and that's why we're seeing a lot of growth in the Create side. Great. Thanks. All right. Let's pivot over to Operate. Let's do Operate for gaming. John, Andrew Uerkwitz at Oppenheimer asked, "One of the strengths of Unity is that you all have a lot of data that gives you differentiated insights into gamer behavior. You have a strong presence in the long tail of A A and A developers. The question is, how do you see the evolution of your market for monetization and back-end services with AA A studios? There's two things. First off, if you go back four and five years, Unity really wasn't a good choice for AA A studios to use for content creation. That's no longer true. That's one of the reasons we've seen so much market share growth on A A and AA A. We now support Xbox and Sony PlayStation on launch date and well before that for launch titles. First, we had to have the basics in place, to take the capability we have in mobile and then make it work just as well in AA and AA A. One of the things to understand, AA A content is very engineering-centric. There's a lot of engineers on the team. With that comes a very justified mentality that I can build everything from scratch. I've seen developers that build their own ERP systems from scratch. They do it because they're engineers, they always imagine they can do it better. What Unity gives them is really two things. Increasing flexibility to start with Unity, again, puts you on third base on content creation. Just as well, we bring them advantages. On the monetization side, as an example, some of our customers might have data on 20 million MAUs or 30 million or 50 million or even 100 if they're at significant scale. As you heard, we're at 2.7 billion. The data advantage is very sizable and very important. We bring tools to them, so increasingly they don't have to create from scratch every time that they need. They can use Unity. On the service side, we bring scale, both on the data side and the infrastructure side that they can leverage. It's worth noting some of the most important games as they moved into online mode post-launch, they fell over. The products that were launched with Unity, Apex Legends and others, they had smooth scaling and successful launches on Unity's back end. It's a great question. Our path really has been mobile to A A to AA A on Create. Now we're just getting into AA A on Create in a more successful way. Operate is usually the echo that's right behind it, and we're coming up fast. Great. We have a question on the recently announced Game Growth program. I'll take that one. That's from Yao Chew and Brad Zelnick at Credit Suisse. The question is this: You announced Game Growth program late last year. Can you talk about the origin of the concept, and what is your value proposition for indie developers? First off, look, this is the very early days for this program, but even so, we're very excited that the Operate team created this Game Growth program. The idea sprang from our view that great games often go unnoticed, especially in the indie segment. As you know, Unity has always been on the side of creators, and it just didn't seem fair that creators would have to choose between their entertainment vision and tactical execution to build audiences and make money. Think of Game Growth as a way to bring to bear the best practices that we've seen succeed over the course of many years through the accumulation of literally petabytes of data from hundreds of thousands of applications and millions of tests run by our tools. We think this is a win-win model for a select group of our customers because the Game Growth program lets them focus on building great games, and we help them succeed on the monetization front with an enhanced revenue share model. Let's go to the 10th question, and this is Operate for verticals for John. Brent Bracelin at Piper asked, "How would you describe the opportunities to monetize non-gaming verticals within the Operate system? It seems that Multiplay has applicability outside of gaming. First off, is that a correct assumption? More broadly, at a high level, how would you think about the drivers for this part of your business? First off, I would say that I'm truly excited about the opportunities for Operate outside of gaming. Starting point, though, is most non-gaming applications you see today, whatever app you're using, they're not presently real-time 3D, and they're increasingly becoming real-time 3D. What we've done with products like Forma and Reflect is we've lowered the bar to take your application into the 21st century. If it's architecture and construction arena, that's Reflect. If it's many industries, but where you might get involved with a configurator or real-time 3D website, that's Forma. In both cases, by way of example, we also simplified the process not only for creating a site but supporting a site with our own Furioos service for delivering real-time content to these new applications that are out there. Once an application is real-time 3D, it's no longer static. It needs data, it needs streaming, it needs support, and that's where we come in. If it's Multiplay, we can host it. If it needs content updates and content on a streaming basis, that's Furioos's. We see a lot of opportunity in e-commerce, which is an area we're starting to focus on increasingly now. Again, if you're going to want to see a real-time 3D view of a dining table or customizing the wood or the hardware, those are the kinds of things you're going to need back-end support for. With Unity, it's literally just a checkbox. You don't need to bring in an engineering team to make it work. It's because of circumstances like that and many more, that we feel really good about the Operate opportunity outside of gaming. Great. Let's pivot over to kind of R&D and kind of core technologies, John. Bhavan Suri at William Blair asked, "A big part of your competitive strategy is a focus on R&D-led innovation. Could you talk about what progress you made in 2020, where you're headed, particularly in regard to some projects that you've talked about in the past, such as NetCode and DOTS? NetCode and DOTS are examples of super important innovations at Unity, but they take a different form, and let me address them separately. NetCode, this is the code that a developer needs to bring multiple players in the same instance of the game. It's the networking code that brings people from an RPG, an FPS, a sports game, into the same environment so that they're playing the same game and everything's synchronized effectively. What many people probably don't realize is what is important for a first-person shooter game is different than what actually might support an architect or an engineer at head office. You worry about 10 milliseconds of latency on an FPS. With an application like Reflect, you don't. It's 10 milliseconds wouldn't be noticed, and it also wouldn't be noticed in an RPG or a puzzle game. What we notice in an RPG game is bandwidth. Can you get all that beautiful art, all those beautiful textures onto the screen fast enough? It's really about a bandwidth issue and how it manages that. The point that I'm making is you need different types of NetCode or different specific executions depending on the application that you're supporting. We've already put some of our new NetCode product in the market. We'll be adding a lot to it this year. 2021 is sort of our year of NetCode. It is complex, and this is one of those situations where virtually every game makes it from scratch. It is a very difficult thing for developers to do, and we're going to make that go away. This will enable them to be successful with multiplayer games. It'll get around the issues of lag and cheating and other things, because that's what's built into our product that will enable them to scale more. We also connect it directly to Multiplay, making it very easy for developers to use our Operate services. It's literally one continuous proposition inside the Unity Editor. DOTS is a very different thing. DOTS is our data-oriented technology stack. It's a handful of technologies that has a developer thinking fundamentally different about how data is organized. Let me be clear what I mean by data. Every character or the art behind them, every code set or script that supports animation, every environment, all the physics, all of that is content. If you think about some of the larger AAA games, or if you look at the content behind a car configurator, what we're talking about is the work of sometimes hundreds of people for a couple of years creating all that content. There's a lot of content out there, and traditionally in object-oriented programming, it's bound by how much of that content can go to an individual core and an individual GPU. To be honest with you, for high performance, it's a mess. By getting out of object-oriented and slicing everything into thin slices of data, we can see 10-1 00 times more performance for rich environments that have a lot of content, lots of interactive objects, lots of real-time 3D objects. It's our intent over the course of the next two to three years to continue to bleed into our core technology, sort of easy-to-use versions of DOTS, where you can offload something to a DOTS system, so you can get all that performance without having to work for it. I think it's the future of the way most games will work in years to come, and it's certainly a massive horsepower addition to the Unity technology set. Right. We got an M&A question from Andrew Uerkwitz at Oppenheimer. You acquired RestAR in mid-December, but you also in the past have made a series of tuck-in acquisitions, and today, you have a bit of a cash war chest. As we know, sellers also have high valuation expectations. Could you just talk at least at high level, how you think about M&A as a means to accelerate go-to-market strategies and your technology roadmap? Yeah, sure. As a starting point, going back from the beginning, we spent approximately $300 million on M&A. It's not been a gigantic investment on our end. We've been acquiring companies mostly in an acqui-hire orientation to get capability that we think we want under the platform, and it's been mostly a build versus buy tuck-in orientation. Now, this idea of a war chest. I'm a believer that most M&A is a bad idea. We've got really high hurdles for clearing on strategic criteria, tactical criteria, execution, culture. It's all got to match. The bigger the price, the more hurdles we're going to put in front of it. Obviously, I don't have anything specific to say. I wouldn't rule something out. Our notion is that M&A to get us something that we can't get another way cheaper or more effectively. I feel really good about what we've done so far. When we do reviews for our board on the M&A we've done so far, it's almost all worked and worked really well. We want to keep on that. Think of us as primarily organically oriented, but we look at things to take advantage of where we can go in the market. Great. This is, I know in my opinion, the best-written question we've cut all through all of you guys sending us stuff. This is from Yao Chew and Brad Zelnick at Credit Suisse. I just have to read this word for word because it's too good not to. John, you're pretty quotable as it relates to your comments on XR. I'm not sure which I like more, gap of disappointment or analysts are idiots. Being a former analyst, I like that line. What are your latest thoughts here between the bear camp, who says if COVID didn't bring XR to the forefront, nothing will, and the bull camp, which says this time is different. What's different today? What are the key moves in the landscape, and what are the platforms that you're watching? My first presentations on XR at Unity go back five years. At the time, products like Oculus were winning CES and other awards as being the product of the show. It was then that I was coming out with this gap of disappointment. What I was explaining is in the market, a lot of the analysts were projecting this staggering growth taking off really the next year or the year after that. What I was explaining was that wasn't going to happen. The gap of disappointment was I expected a much slower growth in the initial years. The reason I felt that is successful consumer platforms need to meet a number of criteria. The hardware needs to work. That's the starting point. It needs to be simple. If it's as challenging as programming a VCR back in the day, it's not the kind of thing that's going to yield mass adoption. I can remember trying a number of these devices early on, and I'm pretty familiar with this space, and it would take me hours to set it up and sometimes hours to get it going the second time. I'm running around with a cable in the back of my head, and that's not an easy thing to do. I felt that it was wanting at that level. It's got to have a consumer price that works. Probably more than anything, people need to remember that people don't buy hardware for hardware. They buy hardware for what you can do with it, the software that you can play on it. There needs to be a vibrant and a rich ecosystem of content. For that to work, you also need to have developer economics that bring people onto the platform. Those are a handful and there are other criteria. I haven't seen the combination yet where it's all brought together. Facebook has made really good progress with Quest 2. It's an impressive device. They've announced that more than 60 titles generated over $1 million in revenue. For people to develop content that's really going to be beautiful, $1 million doesn't cut it. It needs to be $100 million or multiple hundreds of millions. That will happen, I'm highly confident. Think about this for a minute. I owned an early MP3 player, many of us did, well before the iPhone. That didn't make me think when I got that low penetration products that were produced by a number of manufacturers, that music wasn't going to make it to my pocket someday. I was pretty sure it was going to make it to my pocket someday, just that wasn't the right product. If you remember, one of the big innovations from Apple and Steve Jobs was getting all the music publishers onto the Apple platform, which is what ignited the massive growth in that arena. The point that I'm making is simply this: I am highly confident that the experience is spectacular with XR devices I've seen. I am highly confident that the larger players that are operating in the ecosystem see what we see, and they're going to get it right. If I were to give that same presentation around the gap of disappointment that I gave five years ago with no real endpoint in sight for when all this was going to come together, I'd say I can start to see that it's going to come together. Thank you for all the early investors in XR to get it off the ground. You made the industry possible. I think now we're going to find that there's more opportunity in the years to come. I feel good about it, but it's still tomorrow for scale. Great. Thanks. We'll finish up with a couple finance questions. First, let's start for Kim. Tom Roderick at Stifel asked, can you provide some detail around which areas you're focusing your sales and marketing investments on between gaming and verticals? More broadly, how should we think about operating leverage versus revenue growth? Sure. Thanks for the question. We see huge opportunities in both gaming and in new verticals, we are definitely investing aggressively in both. Currently, the majority of our sales and marketing investments are still in gaming, particularly if you look across both Create and Operate. We're actively growing our investment in other verticals, especially on the Create side. As we did in gaming, we'll start with Create and then expand to Operate. John talked about some of the opportunities for other verticals within Operate. We built out a multi-channel go-to-market model that enables us to push the right products through the right channels to optimize sales and marketing effectiveness. We have a direct sales team in addition to inside sales. We have a lower cost sales development team. We have indirect reseller channels. We have strategic partnerships that enable demand gen, and we have our online store. We're moving quickly to grow both in gaming and verticals with this approach. In terms of operating leverage, we're very focused on meeting our revenue goals and maintaining our gross margins so that we can both invest in future growth, revenue growth, as well as increasing operating leverage. One thing I should point out that's important to understand is that if we exceed our revenue expectations, we will reinvest in a disciplined way the upside into revenue-driving initiatives rather than accelerating our path to profitability, which we hope to achieve on a free cash flow basis by the end of 2023. Great. Thanks. I'll take the last kind of tactical question. Franco Granda at D.A. Davidson asked, "Hey, you increased prices by about 20% on Pro Plus tiers in last January. What has been the reception of this pricing hike by users in the first year? How should we think about the percentage of accounts that now fall under the increased pricing plan in terms of upside for 2021?" As you pointed out, yes, we raised prices just over a year ago, and the large majority of the price increases rolled through our numbers, and those factors are embedded in our guidance. For context, just so you know, we got very little pushback from our customers on the price increase, and that's a good sign because it says that our developers see a lot of value in our technology. More even stepping back further, our view is that you earn your way to market leadership, and you do that by delivering better functionality at lower cost of ownership. Our goal right now is to focus on those factors rather than kind of getting some sort of short-term pop that we would get from raising prices. Now we're going to open it up to open Q&A. Let me open up this, and I think we can do this right. The first person will be Yao Chew at Credit Suisse. I think yep, there you are. You can ask a question there. Hey, can you hear me? Yep. That's great. Hi. Thanks, everyone. Thanks for taking my question and congrats on a great close to the year. In particular, thanks for helping break out the COVID and IDFA impacts. My question is on that $30 million, either John or Kim. Really wanted to double-click here in two parts. Number one, is this $30 million number consistent, worse, or better with the way you were thinking about approaching the situation 90 days ago? A lot has changed. There's been a lot of new announcements from key players in the space. Just trying to understand the cadence and the approach to that. Second question is how you're thinking about the shape of the recovery and the impact on that. Is this a one-year issue where most of it goes away by the end of the year, or should this lag a little bit more into 2022 at this point? Thank you. John, you want me to start, and you can jump in? Sure. Yeah. I don't think a lot has changed in terms of our thinking around the impact. We were planning potentially for some impact in Q4, and then it was delayed. In general, I wouldn't say a lot has changed in the last 90 days. We have been working on this, honestly, for years. We've been preparing for this. We knew that this was a risk and that this moment could come. We've dealt with this with GDPR. I wouldn't say that things have materially changed in the last 90 days. As we mentioned earlier, we feel very confident in our ability to forecast our business. This does certainly introduce some uncertainty, but we feel confident that we're able to predict the impact to our business. In terms of the shape of the curve, John, I'll maybe let you take that one. I would just say that there will be a short-term impact. Initially, as advertisers adjust to the changes, we feel that there will certainly be an impact in the year, and that's why we've articulated the $30 million. We do believe over time, there's a real opportunity for us to gain market share. Yeah, just a little color. I would say obviously, 2020 and 2021 have two unusual impacts, right? IDFA is a pretty big deal, and COVID's a pretty big deal. Deep analysis on COVID tells us that consumers, it accelerated the future. People came into the present. We'll probably see some declines or at least slowing in growth on engagement. I don't think we're going to be impacted by that much. Of course, 2021, we're likely to be home for another six months or so, which is not the way any of us want it to be. We can validate that with China. China gives us a really good early read, so we don't really see anything there that's particularly disruptive to us going forward. On IDFA, as important as this is, and it's certainly made a lot of press, from our perspective, it's one of three, when I think about it, one of three factors. One is overall growth in the industry around user acquisition driven engagement and growth. I don't see that going anywhere. The game industry is very robust. It's growing. We feel confident in that. Within that world, we're gaining market share and have been growing market share based on a better product and better service. Within that, there is a bit of a shift in the force with IDFA, and we've quantified for that. As you can tell, it's not a major part of our revenue stream in terms of its impact. We feel pretty confident that we're in the right place doing the right things. Great. Thank you very much. Hey, Tom Roderick at Stifel, you're up next. All right. Can you hear me, Richard? Yep. Victory. All right. Thanks for giving me a question here. Congratulations, everybody. Great year. A lot to work through and a fantastic finish. Kim, you noted, I think the net dollar retention number was 138% for the year. I was hoping you could kind of help us square that with some of the positive benefits you saw from COVID during the year. In other words, maybe give us sort of a level set for how that might play out in a normalized year. I know it's not a metric you necessarily guide to. Perhaps you could set the table for us with help thinking about what some of the one-time benefits were this year in that number. Yeah, sure. Overall, NER has been a very strong metric for us. As you've seen, it's been well over 120% for the last 2 years. What we saw this year, if you look at the sequential trends, is in Q2 and Q3, we saw a pretty healthy jump in NER as the shelter-in-place orders drove that higher end-user engagement that we talked about. Within our Operate Solutions business in particular, it really drove that metric in Q2 and Q3. Then what you see is it coming down a bit in Q4. Some of that had to do with a tough compare over Q4 2019, in which we had a more typical seasonal lift. We benefited from a number of product and algorithm enhancements within Operate Solutions. That's some of what's going on within that trend throughout the year. To answer your question, thinking about next year, we do expect that metric to moderate, particularly given those tailwinds that we had in 2020 and the impact of IDFA in 2021. Moderation, we expect that metric to have some volatility, but we really believe it will be a very strong metric for us as we just continue to see the growth within all of our customers across both Create and Operate. Excellent. That's it for me. Thank you. Thanks, Tom. Franco Granda at D.A. Davidson. Hi. Good afternoon. Thanks for taking my question. I had two very quick ones if I may. One for John and one for Kim. The first one for John, really. There's been a lot of questions about user engagement as we enter 2021, right? There's two big trends that could potentially impact user engagement, particularly in the mobile side of things. One obviously being COVID, which you talked about in detail, and then two, the launch of the new consoles. My question really is on the latter, have you seen a slowdown in engagement across your platform as a result of the new console launches? Are the supply issues acting as a small benefit today since a lot of people haven't gotten their hands on one? Really the second one, for Kim, can you break out what percentage of your total revenues are advertising revenues? Perhaps if you do that, what are the margins associated with those? Thanks. The answer to that somewhat lengthy first question is no. You might want some color on that. Just a starting point. When we do monthly engagement, it's mostly mobile because most of the world's players are mobile. Let me just give you some way to think about that. In aggregate, adding all the consoles together at any given month, you might have 100 million players. Now, they're obviously very engaged players, and they spend a lot of money. A lot of them spend $60 for titles, upcoming $70 per title. My video's off. Those are very important customers. Engagement is over 2.7 billion users, most of them mobile. I would say that the console launches has relatively little effect. What typically happens, and is happening now, is those that were able to get an Xbox and a PlayStation, the new generation of products in the end of last year, is they shifted themselves from prior consoles to the new consoles. There's definitely always a big kick up in engagement for those users that managed to get the new hardware. If you look at the numbers in the scheme of things, we're talking about something that was already 3% and 4% of the total user base. Of those, a tiny portion of them managed to get an upgrade to the new hardware. What I expect to happen, and I think this is important, is that the market for console and PC has been losing market share at the hands of mobile for quite a while now in dramatic ways. Typically around a new console launch, new hardware, there's a reinvigoration of console, and I fully expect that to happen. I'm looking forward to playing more of the console games on the new devices. No, we haven't seen any sort of net reduction in engagement. Yes, in terms of the advertising revenue. We don't break out our revenue by product. We have a mix of product and services within both Create and Operate. I can say that it is the largest piece of our Operate Solutions business, primarily because it was the first. We've been building that business for several years now, and some of the other products and services within Operate are just relatively newer. It is a larger portion of that business, but we're not breaking it out. On the question around margins, that's also something we're not disclosing. We actually, as a company, don't really look at our margins by business line. We look at the total company margin, and then we do look at product by product margin profiles, and we're not breaking that out. I can say that when we look across all of our products and services, two of the highest growth margin products are our subscription product and our monetization service. I want to add one last nuance on the engagement point. People buying higher-end phones definitely correlates to increased engagement in mobile gaming, and most people install more applications around new hardware. You've all done it. You get a new phone, you install a bunch of new stuff. The numbers on the new Samsung and the new Apple phones are numbers that are orders of magnitude bigger than console launches are in terms of user households. Don't forget that what we've just witnessed is not just in the world of console, it's also in the world of mobile. Great. Brent Bracelin at Piper Sandler. Used to be Piper Jaffray, but now Piper Sandler. Good afternoon. Good seeing the team here. I had one question I wanted to drill down into a little bit more, and it's really around the beyond gaming segment. I know, John, you saw there. Six months ago, this was what? 8% of the Create mix. It's now 13%. That puts it, by my math, on a year-over-year basis, close to triple-digit growth. Accelerating growth in beyond gaming, why now? Is this a Forma, Reflect product bump, one quarter? Is this auto configurations just taking off? Walk me through what are the drivers of this, what looks like sharp inflection point around momentum for 3D beyond gaming. Let me start with some initiation points. What typically happened in non-gaming verticals is we start by saying hello and telling them what we do for a living. That often leads to curiosity in the technologists there that already knew how to use Unity. There's always a few of them around because they make games on weekends or whatever. They start messing around with a project. What happens after that is we engage in some level of professional services support because they can't quite figure out how to use it at scale to get them some sort of meaningful application underway. Then they start scaling seats. Now, this is what we talked about 2 years ago when we were private. That was our model. We take a while to develop. In a way, I was sort of warning about the gap of disappointment, if you want to think about it that way. In other words, great idea, just takes a while to get through the process. Forma and Reflect are runtime applications, meaning you're not engaging this 747 control system, this giant airplane with a million buttons and levers in front of you. You're dealing with four, five, six buttons, and you can get the benefit of real-time 3D. That leads to people buying more seats because you need the seat to get the app and services behind it. We only talk about two now. A big chunk of verticals come faster because of real-time applications that dramatically reduce complexity to getting up on the platform. I think that's going to be our path forward for some time. Sometimes what we might work on a custom basis with a developer will turn into a real-time or runtime application that we can provide for a developer. By way of example, Forma started with us initiating conversations with the auto manufacturers about helping them build car configurators. Of course, tractor configurators, boat configurators, plane configurators. God knows that you can configure a pair of Levi's these days. The point is, we realized it was the same thing over and over and over again. Let's enable it, simplify it, take the speed bumps out of the way. Really, it's that insight that made me a lot more comfortable believing that we had long-term, very rapid growth in verticals outside of gaming. Great. Well, certainly good to see you, and appreciate the color. Thank you. Thanks. Last but not least, Mario Lu at Barclays. Great. Hey, guys. Thanks for taking the questions. I guess I'll ask the boring ones on guidance. In terms of the 1Q guide, if we assume a sequential growth for the Create segment in 1Q, I believe that implies mid to high single-digit growth sequentially for the Operate segment versus historically, it was growing around 20%. If we're only assuming like a $2 million-$3 million hit from IDFA in 1Q, are there any other factors to call out regarding this lower sequential growth versus historical? I'll kind of give you a really high level, and maybe Kim can come in with more. High level, we saw an acceleration of our business on Create after the COVID transition. While we're not giving specific numbers, we expect Create to grow faster than Operate in 2021. All in, and that's a function of the fact that we saw a slowdown in the middle of the year, and now we're seeing things like a really robust pipeline in verticals and in gaming for growth around the new product stuff we've been announcing. Obviously, the road bump on IDFA is specifically to Operate. Those are enough to tip the balance in favor of Create, where 2020 was an Operate story. I think that's right. I don't have anything to add. Okay, great. Just one more on the full year guidance. The operating income margin guide at the midpoint's -10% versus this year, a -7%. I think, Kim, you mentioned that headcount is particularly stronger early in the year. Is it evenly distributed between sales and marketing, product development, G&A? What are your updated thoughts on long-term operating margins for the company? Yeah. I think I may have mentioned earlier, we do have a profitability goal for 2023. We are going to keep moving on that path. Keep in mind that last year we had all those COVID savings that really drove our operating margins. This year, we thought very carefully around that balance between investing and continuing to drive profitability. To answer your question, we are investing as much and as fast as we can, first and foremost, always in R&D. You'll continue to see that. Comes sales and marketing, and we're continuing to work on driving leverage in G&A as we scale, as we find efficiencies. As a young company, we've been focused on growth, and we're shifting now to get more leverage out of our G&A line and continue to drive those investments in R&D and sales and marketing. In terms of the first quarter, yeah, I mentioned that the headcount growth is coming really strong in the first quarter, and that will moderate throughout the year. Like I said, we're balancing and we are focusing on maintaining our gross margins so that we can both make these investments and continue to move towards profitability in 2023. Great. Thanks, Kim. Great. All right. That's on at 6:02 P.M. Eastern Time, it's eight minutes shorter than last time. We tried to help you guys out. Thank you very much for everyone, and we really appreciate all your great questions and insight and support, we'll talk to you soon and hopefully again during the quarter and then the next quarter. Thank you so much. Thank you.