Unity Software - Q3 2023

Transcript

Luis Visoso (EVP and CFO)

After the closing of the market today, we issued our shareholders' letter. That material is now available on our website at investors.unity.com. Today, I'm joined by Jim Whitehurst, our CEO, and by Luis Visoso, our CFO. But before we begin, I want to note that today's discussion contains forward-looking statements, including statements about goals, business outlook, industry trends, market opportunities, expectations for future financial performance, and similar items, all of which are subject to risks, uncertainties, and assumptions. Now, you can find more information about these risks and uncertainties in the Risk Factors section of our filings at sec.gov, and actual results may differ, and we take no obligation to revise or update any forward-looking statements.

Finally, during today's meeting, we will discuss non-GAAP financial measures. Now, these non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A full reconciliation of GAAP to non-GAAP is available in our shareholder letter and on the SEC.gov website.

Great, so let me turn the call over to Jim to kind of make some opening comments.

James Whitehurst (Interim CEO)

All right. Well, thank you, and let me say good afternoon to everyone, and thank you for joining us on today's call. We released our Q3 earnings today, as well as the shareholder letter that describes our results. I assume you've all read that, so let me just highlight three quick points before we get into Q&A. You know, first off, I've been at Unity now for about a month, and I have to say, I'm so impressed with the passion both inside the company and more broadly in our community, and that is unquestionably a good thing, that we elicit so much passion from our community. It shows the level of engagement that we have and the importance of the role of Unity in our community.

It's our job now to focus that on, the most important task, which is to build a best-in-class platform that help makes creators more successful, from start to finish, from design to monetization. Second, the world has changed, and we're changing with it. We've taken some good first steps to bring expenses down, changing Unity from a money-losing, to a cash-flow-positive company in less than a year. That's a good first step, but frankly, we're examining the company from top to bottom, ensuring that we transform Unity into an even more nimble and focused business, and I'm sure we'll talk more about that. And third, once we position Unity to succeed, we need to accelerate growth. We'll get there by focusing on large, growing markets, but most importantly, by doubling, if not tripling down, on building amazing technology that helps our customers succeed. If we do that, growth and profitability naturally flow from that.

So with that, let me turn the call over to Richard.

Richard Davis (Head of Investor Relations)

Great. Well, thanks a lot. So maybe what we'll do, which we've done in the past, as we kind of get inbound questions during the quarter and things like that, so maybe we'll kind of hit like, the two most common questions we often get. Now, we'll start with Jim, and then we'll go to Luis, and then we'll go to open Q&A and things like that. So for Jim, you know, if you kind of step back, you know, what, what do you see. And I know you've been, you know, short-term here for a month, but, you know, maybe it's fair or not, but what, what do you see the company looking like in three-four years? What, what would you what's your vision?

James Whitehurst (Interim CEO)

Yeah, sure. And let me start off saying, you know, had experience in a company, building a business as part of a broad community, so I naturally come back and focus on how we think about community. So if I just put that simply, in five years, I want us to be the trusted leader of a community of creators building on our technology, and because of that, we'll be an indispensable partner for game creators to build, operate, and profit from their creations. That alone is a hundreds of billions dollars market.

Secondly, our technology, and this is one of the things, coming from enterprise, I've been so impressed with, is incredibly relevant to enterprises, and so the second piece of that is I'd like to see our technology as the default choice for enterprises and individuals to create and interact with 3D content. Again, that is a tremendous untapped potential as well, and so if we can do those two things, be an indispensable partner, kind of a leader in helping game developers, and being the 3D visualization technology that the world comes to, that's a really exciting business.

Richard Davis (Head of Investor Relations)

Great. And then, Luis, you know, it's addressed to some degree in the shareholder letter, but could you kind of explain some of the key interventions that are being considered?

Luis Visoso (EVP and CFO)

Sure. Thank you, Richard. You know, we started a comprehensive assessment of our product portfolio several weeks ago, and we're evaluating every product in our portfolio through, I would say, three lenses. First, are we meeting our customer need in a unique way that differentiates us from others? Second, are we able to grow revenue, expand the margins, and generate free cash flow at attractive levels? And third, is the opportunity large enough and sustainable to build a meaningful business over time? And while we're making great progress in this evaluation and planning, it is still early to share more specifics. Now, what you can expect is that we will be making changes to our product portfolio this quarter, in Q4, and we expect the full implementation of the changes to be completed by the end of Q1.

As Jim said, we're also continuing to adjust our cost structure to improve margins, and this will lead to a reduction in force, a reduction in office locations, which we will be announcing over the next few months.

Back to you, Richard.

Richard Davis (Head of Investor Relations)

Great. Thanks very much. Okay, now we can open it up to Q&A from the analysts, so Thomas, if you can see the people that are in the queue, and we can drop them in there. Maybe we answered all the good questions. Oh, there we go. Dylan. Yeah, Dylan Becker at William Blair. Thank you very much.

Dylan Becker (Research Analyst)

Awesome. Hey, guys. Thanks. Jim, maybe starting with you, I think in the shareholder letter, obviously there's a lot of focus on narrowing scope and the focus here, but looking at it a month in, maybe there's some initiatives underway, but how you're seeing the business relative, again, to maybe some of your past experiences and the opportunity to drive that efficiency that you've done, maybe utilize some of the prior playbook you've seen?

James Whitehurst (Interim CEO)

Yeah, look, thank you, Dylan. A great question. And look, I don't-- I want to always be careful not too much drawing parallels, but frankly, there is a lot of parallel to this, and frankly, when I first got to Red Hat, which had an industry-leading product with Red Hat Enterprise Linux, but was spending a tremendous amount of time doing five or six or seven other things. And it's not just the expense associated with it, it is the management time and attention, and more broadly, the clarity of focus throughout the organization that you get from doing fewer things, frankly, where you are winning and have a right to win. And so I do see parallels there, just very, very simply.

You know, we're doing a lot of things, and we obviously have a leading core product, you know, that's growing very nicely. And then there are some core extensions off of that which actually fit in well with good synergies, but frankly, we're doing a lot of other things, and so one is just, I think there's very similar to Red Hat. Let's start off narrowing down, make sure we are on our path to achieving the full potential of our core business before we get too busy doing other things that aren't directly tied to that. And then number two is just, you know, sharpening our execution.

You know, I think obviously there's a natural evolution of companies where, you know, you start off, you get kind of product market fit, you're trying to experiment, and so you're running a lot of experiments around. You're less focused on driving effectiveness and efficiency. And I think we're to the point where, you know, market's voted. We got a couple of really leading products, whether that's the engine and runtime, whether that's our core kind of monetization stack, and we need to focus down, put the right KPIs in place, tighten our belts, and execute into those things. And as we do that, we have a solid, profitable business that we can scale it from these leading positions.

And so it is a little similar to Red Hat, both in terms of, you know, leading product, but doing a bunch of other things and losing focus and, you know, just naturally not being at the point, until now, of really looking to kind of build an effective and efficient operating model around those things. And so I think those are the two big ones that feel very, very similar. Also, equally incredibly passionate, brilliant people who are deeply dedicated, in a deeply mission-driven company. And so when you have that, your ability to execute when people are aligned and passionate about what you do is just so much easier, and that definitely shared with Red Hat.

Dylan Becker (Research Analyst)

Sure. Awesome. Okay, helpful color there. And then maybe, too, I think you guys called out a lot of the synergies you're seeing within the Grow solution base and the importance of ironSource and LevelPlay there, but maybe it's a little early to call out from a product perspective, too. But you, you did mention tightening the integration between kind of Create and Grow, but how you think about that synergistic value coming together across the platform over time, too? Thanks.

James Whitehurst (Interim CEO)

Yeah. I'll start, and Luis, if you want to add. So, you know, first off, really working to build an operating model that drives value in both kind of data and then and but across Create and Grow. I think we can do a better job of doing that. You know, we've been working on the integration of just, you know, kind of people and things, but really building the flywheel, there is an area I think we can kind of double down our focus on, which has a lot of value.

The other is just, you know, together, you know, those two things are what drives developer-game developer success, and we're still a little bit, because we're still in the middle of the integration, disjointed in having a single view of our customers, so we can go talk about how we can help them best create value from development all the way through to monetization. And we have kind of those two pieces, and it's just a time to get those kind of fully pulled together, to have single view of customer, ability to engage and talk about how we can create value across that life cycle with our kind of portfolio of offerings.

So there's kind of the operational data-ish, I want to say, stuff, and then there's the broader, you know, single view of customer and being able to act that way set of stuff.

Luis Visoso (EVP and CFO)

Yeah, I agree, Jim. And if I were to add something, I would just say this is unique to us, right? We're the only company that has both Create and Operate or Grow businesses, and that's very valuable to us and to our customers. And remember, we have over 70% market share on the editor, particularly on mobile, so that gives us a very strong base to build upon.

Dylan Becker (Research Analyst)

Great. Very helpful. Thanks, guys.

Richard Davis (Head of Investor Relations)

And then, yep, Michael Funk at Bank of America.

Michael Funk (Equity Research Analyst)

Yeah, thank you. Thank you, Richard. Yeah, and, and Jim, I really, I appreciate the brass tacks opening letter today as well. But just wondering, you know, you did mention that there was limited impact from the pricing change, and bled over into the fourth quarter. What have you been doing to reach out to the game developers and rebuild that trusted relationship with them?

James Whitehurst (Interim CEO)

Well, a couple of things. Obviously, I've been talking to a number of them, and, you know, it's one of these. I think almost all of them that I've talked to or others that I've talked to in Unity who've talked to them start off, you know, with game developers who were upset by the first action. Once you actually get people to focus on the next set of things we did, the first thing you hear is like, "Oh, okay, well, that all makes sense. I'm actually good with that." So the changes we then went back and tweaked, I think helped a lot. But honestly, the biggest thing that helps is when we talk about the future feature velocity we're driving. I was talking with someone here who had just met with a game developer.

It started off very, very negative, but as soon as we started getting into some of the features we're driving, all of a sudden, they went from, "We don't even want to deal with you," to, "Ooh, can we be an early beta customer, and can we actually potentially get in there and help drive some feature set into that? That's right, what we're trying to do." So I think the most important thing is we can talk. I've been saying this internally at Unity quite a bit, having dealt with communities in the past, is we can talk all we want, but our behaviors are what will rebuild trust, and the behaviors are how we make decisions going forward and how we are taking those dollars and reinvesting them efficiently and effectively to build, you know, extraordinary product.

And so Unite next week, we'll have a number of product launches, and I think really kind of focusing on the value we're delivering, will kind of get that buzz replacing kind of noise around, "Well, what are they doing?

Michael Funk (Equity Research Analyst)

One more, if I could. I think a lot of investors are wondering about the decision to pull guidance for the year. Was that based on your view of best practices as a new CEO coming in and assessing the business?

James Whitehurst (Interim CEO)

Well, I'll tell you, my view--

Michael Funk (Equity Research Analyst)

All the numbers.

James Whitehurst (Interim CEO)

Yeah, no, and a lot of people are grumpy about that. Look, the problem, when you are looking to, you know, bluntly wind down or get rid of some businesses, which, you know, is part of what we'll do, is the longer you wait to do it, the better your revenue looks in the short run, and I want zero incentive for anybody here to slow anything down. We need to move, and we need to move fast, and the faster we move, the better shape we are. So we will plumb it all out after the fact for you. You'll know exactly-- You know, we'll be completely transparent.

But what I don't want to have happen is people say, "Well, we kind of guided this, and so if we just wait another month before we do that, you know, maybe we don't close that till, you know, January 1 instead of, you know, November 30th." You know, you can make the numbers look better, but I want to emphasize, we got to move fast, and we got to be decisive, and we're going to emerge. I will say, I think we're sandbagging when we say by the end of Q1. I'm hoping we can do it a lot faster than that. The faster we can get these things done, the faster we have kind of reset and we are focused, the better, and I want zero incentive for anybody to do anything but that.

So it was not a popular move, I can tell you, to say we weren't going to do it, but I think it's better to move fast and then be transparent after the fact. And I promise you, after that, we will be reset, we'll be confident in our numbers, and we will provide guidance for Q1 and the year and give you all the color and clarity you want. I just, in this period of time, I think it's important that we have no barriers to moving fast.

Michael Funk (Equity Research Analyst)

Great. Thank you for that, Jim.

Richard Davis (Head of Investor Relations)

Great. And then, next is, Brian Fitzgerald at, Wells.

Brian Fitzgerald (Managing Director and Senior Equity Research Analyst)

Thanks, guys. I had a couple, if I could. On UGS, letter noted, tough year-over-year comps. Just hoping you'd give sense for how that business performed relative to expectations for the quarter and whether there is anything weighting on that part of the business. And maybe second one follow-up to that is, can you comment at all on ironSource cross-sell opportunity and where you think the business stands right now? When you say in the shareholder letter that the company is not achieving the synergies and that exists across the portfolio, are we right to assume that that's what you're talking about there or maybe that's where the softness in UGS comes from?

Luis Visoso (EVP and CFO)

Yeah, I think-- Go ahead, Jim, do you want to?

James Whitehurst (Interim CEO)

Well, no, you go ahead and start. If you want to kind of give performance versus expectations, I'll give you a sense of what I meant by that, not performing across.

Luis Visoso (EVP and CFO)

Yeah, I mean, we don't want to single out any business because we're not ready to share specifics on whether a business is inside of, outside of the portfolio choices. But I will address your question on UGS. No, frankly, we didn't have the quarter we expected on the business, right? And therefore, I'll be very transparent about that, and we need to continue to drive our business and grow faster. So I'll give you that piece.

James Whitehurst (Interim CEO)

I mean, I'll just say, I will use that as an example. When I say that, I actually mean broadly across the portfolio, but I'll pick on UGS. I think UGS has been quite successful selling into gaming, but if you actually look at the correlation between, say, something like Multiplay and Unity-made games, it's actually quite low. And so what I want to make sure that we're doing is win where we have the right to win, which is around our Unity ecosystem. So I'm not saying it's awful revenue to go sell Multiplay into an Unreal-based game, but fundamentally, the place where we have the right to win and should win is things around Unity.

What I'm looking at across our portfolio is making sure the things that we do are self-reinforcing, the things that we do make Unity games better, and people using Unity make it really, really easy to use our other things and get that flywheel going. So if you look at our correlation between some of our other services and the engine, they're not as tight as I would like to make sure we make it really easy for our devs to use our things, and make our things make Unity, made with Unity games even better. And that extends across, again, we talked a little bit, you know, we've made progress in integrating ironSource, but a lot of that's getting the core stuff together.

Now, getting the flywheel that we think we can do of the real synergies between the Editor and the Runtime, and the Grow business, is something we are just getting kicked off. And, you know, I'm the type, I wanna have a weekly meeting on what's the progress, what are we doing, why, when's it gonna be done? And we've been more focused on the integration than on really getting the synergy flywheel going. And so that's something we're kicking off in earnest.

Luis Visoso (EVP and CFO)

Yeah, Brian, as we've talked before, what we're seeing is good synergies of Grow within Grow, Unity and ironSource, so that's working well. Technologies, capabilities, that data, that's growing well, but as Jim is saying, the Create to Grow is where we need to sharpen the pencil and do a better job going forward.

Brian Fitzgerald (Managing Director and Senior Equity Research Analyst)

Got it. Thanks, Luis. Thanks, Jim.

Richard Davis (Head of Investor Relations)

Great, and next is Clark Lampen at BTIG.

Clark Lampen (Managing Director)

Thanks very much. I've got two, please. Jim, maybe we can start big picture with sort of a view of the engine market. Understand you've only been with Unity for a short period of time, but one of the big questions we get from investors around that piece of the business is how you start to close the gap between really high and fairly dominant developer share and your revenue share at present. Is a variable rate model like Runtime really the key to unlocking that upside, or are there other adjustments that, as you look at that business, you think need to be made to ensure it can grow?

James Whitehurst (Interim CEO)

Well, I think there's a lot. And by the way, we haven't even started on the industry side, which I would actually argue is a larger market than the gaming market for us, but we can come back around on that. So first off, you know, the gaming market is a lower margin market. So when you started at one price, price point and you want to change it, you're obviously gonna get some backlash. So the way I'd rather think about it is, if you think about development all the way through to operating a game is a $100 billion market, right? We're, you know, a very, very, very small, less than 1% share of that.

So our ability to do things like whether it's driving to DevOps or automated testing or if you think about other things that a developer shop, especially teams of developers do, thinking about kind of security, thinking about compliance, identity management. There's a whole set of things where we're not raising price on what we're doing, but we are looking at the costs around what someone does when they're working with us. I think has a tremendous opportunity just on the development side, and then obviously on the operate side, you know, continuing to look for places where, frankly, we have a right to win because of the strength of, you know, our Editor and Runtime and our ability to understand what people are doing and how, and the uniqueness around that.

I think the runtime fee is important for multiple reasons. One is internally, to have people recognize there's value in the runtime, right? And so, if nothing else, it makes it much easier internally managerially saying, "We need to drive more velocity into the runtime and the feature functionality around that." I know you can kind of conceptually say you do it, but it's much easier when there's actually revenue associated with it. And frankly, I think it's easier to explain to customers, you know, that you're paying for something, but look at the value, and now we can accelerate value around that. So I think making the runtime not like a, you know, kind of a second-order citizen in how we think about monetization is important.

I think, you know, going forward, thinking about especially on the industry side, where, you know, runtimes themselves, whether it's the exact runtime or more, or, or more broadly, what that looks like in feature velocity in that, you know, having a price around that and how you think about that as you scale out, I think is important. So, you know, we can get into the specifics around the runtime pricing and kind of what model and, you know, what types of games, et cetera, et cetera, but I think the concept that the, the runtime has value, and so we have a price on the runtime, is healthy all around for how we run the business.

Clark Lampen (Managing Director)

Understood. And I guess, you know, there's a lot in flux, I guess, as you guys are exploring sort of interventions, as you mentioned in the shareholder letter. One of the things that does seem to be consistent, you know, moving forward in terms of focus is AI. I'm curious if you could give us an update on the Muse and Sentis products. How has the closed beta gone so far? When do you think, realistically, those tools could exit beta? And if you have any thoughts around commercialization that you'd be willing to share on this call, would be appreciated also. Thanks.

James Whitehurst (Interim CEO)

Well, my first reaction will be, how about coming to Amsterdam next week to Unite? And you will hear a whole lot about that, and kind of the things we're doing more broadly. I mean, honestly, I mean, I'll let Luis, if you want to comment, but I think given everything we're saying at Unite, we don't want to kind of front-run that here today. So, stay tuned and, and/or come join us in Amsterdam.

Luis Visoso (EVP and CFO)

Yeah, the only thing I would say is, while Jim didn't say much, you can see in his tone kind of how excited he is, so you can take something away from that. So it's very exciting.

Clark Lampen (Managing Director)

Understood. Thank you, guys.

Richard Davis (Head of Investor Relations)

Great. Okay, next is, Kash Rangan.

James Whitehurst (Interim CEO)

Hey, Kash.

Richard Davis (Head of Investor Relations)

At Goldman.

Kash Rangan (Managing Director)

Hey, I don't know if you can see me, Jim, but--

James Whitehurst (Interim CEO)

I can see your picture. I can't see you. It's good to hear from you. It's been a while.

Kash Rangan (Managing Director)

I know, it's been a while. It's been a while, and, I don't know what is it that you use to keep your persona exactly unchanged in the past 50 years? You look exactly the same as you did when I first met you. I think it was 2008 when you took over at CEO Red Hat.

James Whitehurst (Interim CEO)

A good filter on the camera.

Kash Rangan (Managing Director)

I know that definitely helps. That I can see that. I can see that. So clearly a lot to digest coming to the company. One is, what are the chances you would take the job permanently in the next six months or so? It's a tough question, but-- or maybe it's not a tough, it's a very easy one. And secondly, you hinted at tighter integration and tighter synergies between the create and grow businesses. Can you expand a little bit more on that particular thought? And where do we go with that increased synergy, and how does it manifest itself? Thank you so much.

James Whitehurst (Interim CEO)

Yeah. So, look, on the first question, I wanna be respectful of the board, and the board running a process. So, you know, I think as they said, they wanna run a process. And, so I wanna be careful about anything I say, 'cause, you know, if I say I'm a candidate, that kind of screws it up. If I say I'm not, that kind of mess up. So I'm just not saying anything on it. So sorry, Kash, I really just wanna respect the board and the process that they're going through. So, I hate to duck a question, but I'm gonna duck that one, not 'cause I'm not willing to answer, but I wanna respect the board and the process they're going through.

In terms of more tight integration, like, look, we have a lot of information about how games work and how engagement works. So when you start thinking broadly, what we're trying to do is help game developers maximize their success. And I know for some that's just great art, but for others, it's making money, and that's kind of where the monetization and the ad piece comes in. And we actually think with what we kind of understand about how people play games and the analytics that we already provide to some extent to developers who use our analytics products on how the engine works and how engagement works and how people are using games.

We think if we can get a flywheel going with that to do a better job of helping them, you know, monetize their ad space, and obviously, we profit from that. So we think there's quite a bit there that we can continue to build on. And, you know, we're, like, literally early, early, early days in that with a, with a long roadmap of things we're excited about.

Kash Rangan (Managing Director)

Awesome. Thank you so much. All the very best.

James Whitehurst (Interim CEO)

Thank you. It's great to chat. Look forward to meeting you live again soon.

Kash Rangan (Managing Director)

Likewise.

Richard Davis (Head of Investor Relations)

Great, and, Josh Tilton at, Wolfe?

Josh Tilton (SVP, Equity Research)

Amazing. Can you guys hear me?

Richard Davis (Head of Investor Relations)

Yep.

Josh Tilton (SVP, Equity Research)

I got two, actually. My first one is, can you guys maybe give us a sense or a flavor for what is left to cut at the business, since I know that we already did some layoffs previously? And maybe how do you like, what gives you guys the confidence, or how do you guys plan on maintaining that passion internally that you just talked about, as you look to become a more leaner business?

James Whitehurst (Interim CEO)

Well, I mean, I'll start there. You know, I came from the airline business, so you know, very much you know, kind of focused on making sure that we're kind of operationally optimized. Look, I actually feel like when you actually get efficient and effective, and part of that is just building an operating model and organizational structure to support the core business that you're in, you naturally get much more efficient doing that. And so while it is painful in the sense that we will have fewer people, I think the people here will be very inspired by the mission, and what we're gonna do is all around kind of our mission and our values. And you get engaged as you see success and profitable and growing.

I feel very, very good that, you know, as we come out of this phase, you know, people are gonna be both inspired by what we're doing and proud of the success that we're able to generate. Look, it's just a different model versus saying, "Let's spend a lot and hope revenue ultimately passes that, and you make money," it's a little bit more, "Let's get efficient and effective and optimize our business, and then scale from there." And so, you know, this, I'll call it a reset, is a bit of that. Like, let's get efficient and effective. Let's build an operating model that fits the businesses we're in. And then the businesses we're in luckily have a lot of growth in them, and so we scale from there.

So while it's painful in the reset, I think very soon coming out of that, I think people will be able to see we're better able to deliver against our core mission and we're winning.

Luis Visoso (EVP and CFO)

Yeah, on your first question, what I would say is, you know, which was, you remember your question was: how do we keep on finding opportunities to optimize our cost structure? So I would say, number one, we're making different portfolio choices, right? And as you focus the portfolio, then obviously, as you exit businesses, you can continue to drive efficiencies there. Second thing we're doing is we're continuing to drive synergies, you know, between organizations, within internally, and drive efficiencies across the different teams, looking at layers, spans and layers and levels and everything else. And last, we're taking another very sharp look at G&A, and how do we continue to drive G&A so that most of the dollars can drive the products that our customers love and will drive our revenue margins and cash. So that's, that's what we're doing.

Josh Tilton (SVP, Equity Research)

If I could just sneak one more in. From an investor perspective, you know, there's been a string of some interesting news releases. Obviously, the decision not to guide next quarter or the full year is another, you know, I guess, piece of interesting news that we have to grapple with. You know, there's still the-- how do I say this? You're still gonna guide for 2024 next year, which will be another important catalyst for the stock.

I understand that there's a lot of moving pieces and a lot of excitement around opportunities going forward, but is there anything you can just give us in terms of timeline of expectation for when you expect growth to kind of accelerate, to maybe help, you know, ease investors', I don't know, worries around the lack of, you know, where the numbers are going in the near term?

James Whitehurst (Interim CEO)

I'll start with some comments, and Luis, you're probably better equipped to be able to answer specifically. Look, I think that even as we get into next year, more focused execution generally leads to, you know, success in the marketplace. And so, you know, I'm thinking 2024 already just being more focused, you'll see kind of improved gross performance. And then again, we have a whole series of growth drivers that we need to go execute against. Those, you know, we are working through as we kind of do the portfolio work, so we'll have to really talk about that more in 2024. But, you know, when we get in January, well, in February, I guess, the next time we speak with you, we'll be able to give you a lot more detail around that.

But I am confident both seeing the size of the markets and our position in those markets, and, you know, and I'm also just confident, without having all the plans laid out, but, you know, for it, that just more focused execution all the time and all of my experiences I've seen, leads to better performance on the revenue side. So I'm, without the full numbers, kind of ready to talk about them. I'm confident in next year.

Luis Visoso (EVP and CFO)

Totally agree. We'll give you more flex- more visibility, you know, with our Q4 earnings, so in a few months. I think Jim mentioned the opportunity is big, the portfolios is right that we already have, now we just need to be more focused, and as Jim said, you know, we just need to execute. But we think we will- we're doing everything we can to have a very strong 2024. That's our goal.

Josh Tilton (SVP, Equity Research)

Super helpful, guys. Thank you.

Richard Davis (Head of Investor Relations)

Great. And then our last question will be with Jason Bazinet at Citi.

Jason Bazinet (Equity Research Analyst)

Thanks so much. Appreciate you coming in and making these changes so quickly. I just wondered, you know, there's obviously a wide berth that you have in terms of how the magnitude of the changes that you might pursue in terms of pruning the portfolio. Are there any guardrails as you're going through these changes, i.e., no matter what happens, we don't want free cash to go negative, or no matter what happens, we don't want EBITDA to go negative? Or is it really, you know, we may have to go through a period that's, you know, more difficult on some of those key financial metrics that the Street cares about, because it'll paint a better picture in 2024, 2025?

James Whitehurst (Interim CEO)

Well, I mean, I'll start. I mean, frankly, the good news in the things that we're looking at, it's not like we're peeling off businesses that are, you know, highly EBITDA positive because they don't fit, right? I mean, we, I think in a good way, we're investing in a lot of things, and so this is more about looking at kind of peeling off some things that we were doing that frankly aren't profitable. So I don't think you're gonna see a real dip at all, even this quarter, and certainly not as we get into next year. But Luis, you're, you know--

Luis Visoso (EVP and CFO)

Yeah, I think the only other thing I would add is we're not thinking about a long transition, right? Once decisions are made, which should be this quarter, we will start implementing this quarter. We'll be 100% done next quarter, and that's it. It's not like a business model transition that takes a year or two years or three years to complete. These are things we're planning to do and execute now.

Jason Bazinet (Equity Research Analyst)

Okay, and so the general--

James Whitehurst (Interim CEO)

Yeah, I mean, Q1 might be a little, 'cause we haven't finished it, but, in other words, I wouldn't think our margins in Q2 would be that different than Q4 next year, right? I mean, this is a rip off the Band-Aid, reset, and then we're going.

Jason Bazinet (Equity Research Analyst)

Okay, super helpful. Thank you.

Richard Davis (Head of Investor Relations)

Well, that wraps it up. Jim, if you wanna have some closing, you know, two or three to say hello, and then we'll be done.

James Whitehurst (Interim CEO)

Yeah. So look, I really appreciate your time. I just want to emphasize again, that there, you know, when I, frankly, bluntly, when I first, agreed to come in, when I kind of got the call, I thought, "Okay, this company has some opportunity," and, you know, I'm sure like a lot of companies, it, you know, doing too much, and there's some focus. But I have to say, I have become more and more convicted in and excited about the long-term growth opportunities of the company, today than I was a month ago.

I mean, this really is a very powerful, very defensible moat of technology. We didn't even get a chance to go into that. That's valuable in so many places, and it's a matter of really kind of picking, you know, what is the pathway to focused execution, deliver results on one, add another, deliver on that, add another. So it's, but the good news is, because of just the nature of the technology and the fact that it is a platform business, it's very highly defensible. And again, real-time 3D, which one could argue is interactive 3D, you know, we're really the only way to do that across myriad platforms at scale. And when you kind of think about the number of areas, that makes sense, whether it is consumer products companies, whether that's, you know, industrial companies and visualization.

Obviously, in gaming, I feel like we have a number of opportunities, and our key is not that. The key is making sure that we build a pathway to profitable growth, by executing each of those in the appropriate order, so we can continue to deliver, you know, results that you can see and be transparent about it. But, you know, clearly, that opportunity is there.

Richard Davis (Head of Investor Relations)

Great. Thank you all, and we'll see you in the future weeks and months and over time. Thank you very much.

Luis Visoso (EVP and CFO)

Thank you.

James Whitehurst (Interim CEO)

Thank you.