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Item 1. Business

2023-02-27 compared with 2022-02-22 · 49 added, 307 removed, 68 unchanged (84% of the section changed)

Unity is the world’s leading platform for creating and operating interactive, RT3D content.

Creators, ranging from game developers to artists, architects, and automotive designers to filmmakers and more, use Unity to make their imaginations come to life.

The Unity platform provides a comprehensive set of software solutions to create and operate real-time 2D and 3D content for multiple platforms, including mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.

The content built on the Unity platform offers users a fundamentally more engaging and immersive experience than traditional static content, regardless of industry or purpose.

This is because content made with Unity is:

• interactive, allowing end-users to connect with the content and with one another;

• real-time, so it can instantly reflect data and adapt to end-user behavior and feedback;

• immersive, because graphics have 3D shape and depth, permitting multiple viewing angles, and enabling augmented and virtual reality.

Our platform provides a comprehensive set of software solutions to create and fully operate real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.

In the fourth quarter of 2021, we had on average, approximately 3.9 billion monthly active end users who consumed content created or operated with our solutions.

The applications developed by these creators were downloaded, on average, five billion times per month in 2021.

Unity has built its reputation in gaming, and our scale and reach in this industry are significant.

We estimate that in the fourth quarter of 2021, we increased our mobile market share with more of the top 1,000 mobile games made with Unity.

Unity’s platform helps game developers—from the largest publishers in the world with teams of hundreds, to mid-sized, small, and independent publishers, to individual creators—build and operate high quality games, rapidly and efficiently.

Unity games can be built once and deployed and operated across more than 20 platforms, including Windows, Mac, iOS, Android, PlayStation, Xbox, Nintendo Switch, and the leading augmented and virtual reality platforms, among others.

As gaming has proliferated, the business models for content have evolved beyond one-time purchases to include advertising and in-app purchases.

Unity enables these new business models by providing creators with the solutions they need to easily run and monetize their content.

What's more, the dramatic growth in the demand for interactive content is driving industries beyond gaming to embrace the advantages of RT3D content.

Creators in many different industries are leveraging our platform to provide faster content creation and efficient deployment across formats and use cases.

Today, Fortune 500 companies in industries such as architecture, engineering, construction, automotive, transportation, manufacturing, film, television, and retail use Unity for many new use cases, including automobile and building design, online and augmented reality product configurators, autonomous driving simulation, and augmented reality workplace safety training.

These new forms of content are emerging parts of our business and represent a significant opportunity for growth.

The Unity platform consists of two distinct, but connected and synergistic, sets of solutions.

Our Create Solutions are used by content creators—developers, artists, designers, engineers, and architects—to create high-definition, real-time 2D and 3D content.

Our Operate Solutions offer customers the ability to grow and engage their end-user base, as well as run and monetize their content with the goal of optimizing end-user acquisition and operational costs while increasing the lifetime value of their end-users.

We offer our Create Solutions primarily through monthly subscriptions and our Operate Solutions primarily through revenue-share and consumption-based models.

This allows us to generate revenue from our customers as they develop content and also as they succeed and grow.

Subscriptions for our Create Solutions drive adoption of our Operate Solutions.

Unity Software Inc.

Over the years, we have experienced rapid growth.

Our revenue for the years ended December 31, 2021, 2020, and 2019 was $1.1 billion, $772.4 million, and $541.8 million, representing year-over-year growth of 44%, 43%, and 42%, respectively.

We generated net losses of $532.6 million, $282.3 million, and $163.2 million for the years ended December 31, 2021, 2020, and 2019, respectively, which included $347.2 million, $134.6 million, and $44.5 million, respectively, of stock-based compensation expense.

Unity is a content creation and operating platform made up of two complementary and interconnected solutions:

Create Solutions and Operate Solutions.

Used together, our customers can create, run, and monetize their content across a broad range of third-party content distribution platforms.

Unity is the world’s leading platform to provide real-time 3D ("RT3D") development tools and services for creating and growing interactive, 2D, 3D, augmented and virtual reality experiences across all major platforms and device endpoints.

Our platform is used by creators of all types - such as developers, artists, and designers to build content for various industries, including gaming, film, retail, automotive, architecture, engineering, and construction.

Unity was originally founded as Over the Edge Entertainment in Denmark in 2004.

In 2009, we reorganized as a Delaware corporation and changed our name to Unity Software Inc.

Our principal corporate offices are located in San Francisco, California.

We completed our initial public offering in September 2020 and our common stock is listed on the New York Stock Exchange under the symbol “U”.

In November 2022, we completed the transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement"), dated July 13, 2022, by and among Unity Software Inc., Ursa Aroma Merger Subsidiary Ltd., a company organized under the laws of the State of Israel and a direct wholly owned subsidiary of Unity, and ironSource Ltd., a company organized under the laws of the State of Israel ("ironSource", and such transactions, the "ironSource Merger").

Following the ironSource Merger, we now focus on two complementary and interconnected solutions:

Create Solutions and Grow Solutions, which includes ironSource.

See Item 7 of Part II, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the changes to how we present revenue results following the ironSource Merger and Item 8 of Part II, "Financial Statements and Supplementary Data" – Note 5 – Acquisitions, for a further discussion of the acquisition of ironSource.

Create Solutions

Our Create Solutions are a robust set of tools for the development of high-definition, real-time 2D and 3D content.

Designed with creators in mind, the tools are used by artists, designers, and developers across a range of industries ranging from games to aerospace, medical to manufacturing, and beyond.

Designed with creators in mind, the tools are used by artists, designers, and developers across a range of industries ranging from games to aerospace, film to retail, medical to manufacturing, and beyond.

Create Solutions includes our custom scripting tools and a high-definition render pipeline;

graphics, animation, and audio tools;

navigation, networking, user interface tools;

Delivered as a modular application architecture, creators can leverage our products and extensibility to easily edit, run, and iterate interactive, RT3D and 2D experiences that can be created once and deployed to more than 20 platforms including Windows, Mac, iOS, Android, PlayStation, Xbox, Nintendo Switch, and the leading augmented and virtual reality platforms, among others.

The editor, Unity’s flagship product, is accessible on Windows, Mac, and Linux operating systems and enables creators to drag and drop content, such as images, textures, 3D meshes, and sounds, into a virtual workspace.

From there, creators can configure content and compose it into scenes of objects, such as three-dimensional characters, buildings, automobiles, or landscapes.

Additionally, a large variety of components can be added to the objects to make the content dynamic and interactive.

Unity physics is an example of a component, which, when added to an object in our editor, causes the object to behave as it would in the real world, subject to the forces of friction and gravity.

Other components may add animation, photo-realistic textures, or movement to the object.

Once the creation of a game or other application is completed in the editor and the creator wants to deploy content, our platform compiles all of the application’s components around the Unity runtime.

The Unity runtime is a critical part of a Unity application that allows content created on our platform to be interactively rendered in real-time on end-user devices.

Content created in our editor can be easily deployed to a variety of platforms using our runtime, limiting the need for creators to invest in proprietary development technology around each and every platform.

Building off this foundational technology opens a broad, wide-ranging opportunity to make the Unity platform a utility in content creation.

To achieve this, Unity outlined three primary strategies in 2021 to make and democratize real-time, interactive content:

• Expand into cloud-based tools and services:

Unity believes that continuing to be the toolchain for delivering high-quality, interactive, games, and RT3D experiences across most devices will be most successful with a move towards the cloud.

This is to support the significant shifts in enterprise business models, and the need to make tools more easily accessible to all.

To start, Unity brought on remote access platform Parsec Cloud, Inc.

("Parsec") and SyncSketch LLC ("SyncSketch"), which enables cloud-based, secure collaboration between creators and artists.

Unity Software Inc.

• Deliver key tools to professional 3D artists:

In addition to the game developers and 3D creators, Unity deems it critical to provide cloud-based tools for professional artists and consumer creators, thereby enabling an entirely new generation of creators to build, transform, and distribute RT3D content.

In 2021, Unity brought on the tools and technologies from Weta Digital Limited ("Weta Digital"), Interactive Data Visualization (makers of SpeedTree) and Ziva Dynamics Inc.

("Ziva Dynamics"), three highly-strategic acquisitions to democratize access to some of artistry's most exclusive tools and services.

• Link the physical and digital world:

Unity customers across all industries are leaning on the output of virtual replication and simulation to better understand business initiatives, products and even market trends.

Known as "digital twins", Unity is focused on bringing the power of RT3D into these customers’ digital strategies to provide a more robust, 360-view of what’s possible in a virtual landscape.

To date, Unity is working with Hyundai Motors to connect a physical factory with its digital twin to enhance plant management, drive productivity and innovate in the manufacturing process.

And eBay has partnered with Unity to enable sellers to showcase the actual item they are selling in Unity’s proprietary, interactive 360-view.

Operate Solutions

Our Operate Solutions offer customers the ability to grow and engage their user bases, and to run and monetize their content—from 2D puzzle games to multiplayer, multi-platform games, or other 3D interactive content—irrespective of whether the content was created in Unity.

Unity Gaming Services

Developers face technical challenges and unpredictable costs as they launch and run multiplayer, cross-platform games and applications spanning mobile, PC, and console platforms and game genres.

Delays and downtimes are detrimental to our customers, who therefore place a high value on reliable solutions with predictable cost structures.

In 2021, Unity introduced Unity Gaming Services, an improved and streamlined platform designed to allow Unity, and its customers, to drive more value from our Operate Solutions offerings.

With Unity Gaming Services, we’ve simplified the way creators access and harness our solutions from our product suite that offers a common and consistent user experience.

Unity Gaming Services offers simplicity in one platform, one dashboard, one login, and is available through one SDK.

A few examples of products within include:

• Cloud Content Delivery :

Unity’s Cloud Content Delivery is the first end-to-end service for live game updates:

a content delivery network (CDN) and back-end-as-a-service (BAAS) built for game development.

It optimizes the delivery of content to end-user devices, enabling applications to be smaller and therefore accessible across a larger range of devices, increasing distribution opportunities for our creators.

• Multiplay :

The engine agnostic game server hosting and matchmaking platform, delivering resilience and scale to gaming infrastructure which enables the best experience for players.

• Netcode for Games Objects :

A networking code foundation that developers can depend on – customizable and extensible to meet the needs of many multiplayer game types.

• Player Engagement :

Allows developers to target players with specific audiences, content, and economy attributes.

The latest iteration integrates A/B testing results so reporting is manifested in Unity Analytics and Data Explorer.

We’ve also integrated Push Notifications which allows developers to send users push notifications based on logical conditions.

• Remote Config :

Allows developers to make real-time game updates with no code changes or app updates.

Easily target changes to player segments of different skill levels, spending habits, and playing styles - through targeted game updates and A/B testing.

Unity Software Inc.

A leading provider of voice and text communication services for multiplayer games on Console, Mobile, and PC.

Whether your game is built on Unity or another game engine, Vivox can be integrated by teams of all sizes and scale to millions of players.

In-game communication is a critical component of successful revenue-generating multiplayer games.

In short, when players can talk to one another they stay in the game longer thereby increasing player lifetime value.

Vivox is trusted by some of the biggest publishers and titles out there, including PUBG, Valorant, League of Legends, Rainbow Six, and many others.

navigation, networking, user interface tools and more.

Delivered as a modular application architecture, creators can leverage our products and extensibility to easily edit, run, and iterate interactive RT3D and 2D experiences that can be created once and deployed to a variety of platforms.

Grow Solutions

Our Grow Solutions offer customers the ability to grow and engage their user base and monetize their content—from 2D puzzle games to multiplayer, multi-platform games, or other 3D interactive content—irrespective of whether the content was created in Unity.

Many of our customers create games and applications with the purpose of building a profitable business.

This requires both the acquisition of end-users at a reasonable cost and the monetization of these end-users as they engage over time with the content.

Our user acquisition products enable advertisers to efficiently acquire new end-users at scale.

Our focus and strength are in pay-for-performance end-user acquisition, where advertisers pay us based on a tangible outcome or set goal, such as number of installs, rather than on a cost-per-impression basis.

As a result, a large number of our advertisers have open spending limits with us as they can clearly measure the positive return on their spend.

• Personalized Advertising :

an end-user acquisition product that uses machine learning combined with our deep player and game data to drive end-user installs at scale.

Advertisers can define campaigns based on several parameters:

advertisers define the amount they are willing to pay for each install.

Our algorithm maximizes reach and identifies the audience with the highest propensity to install.

▪ Retention :

our algorithms dynamically adjust the cost per install based on the likelihood of customer retention over 7-day, 14-day, and other retention periods.

This minimizes the risk that our customers will spend to acquire end-users that are unlikely to yield attractive returns, including those that churn almost immediately.

▪ Desired Return on Ad Spend ("ROAS") :

our algorithms dynamically adjust the cost per install based on a combination of the ROAS target set by the advertiser and the predicted lifetime value of an end-user.

• Contextual Advertising :

a product designed for cases in which our customers or their end-users opt-out of personalization within apps.

With the depth and breadth of our in-game data, we can deliver highly relevant advertising while respecting stricter privacy elections.

Unity’s monetization products, Unity Ads and Unity In-App Purchases ("Unity IAP"), help developers to maximize the revenue potential of their content by enabling customers to maximize the lifetime value of their end users, while optimizing their end-user acquisition and operational costs.

• Unity Ads :

enables developers to seek the highest value for each impression of their inventory, through our Unified Auction, from a broad range of advertisers including direct Unity customers as well as demand-side platforms, or DSPs.

Each time an event is triggered within our customer’s application, our auction determines the best advertisement to show the end user.

Customers can access Unity Ads through a software development kit that enables ad delivery, rendering, and transactions.

• Unity Mediation :

Unity Mediation gives developers the tools they need to maximize the revenue from their games without sacrificing the game experience.

Mediation gives access to key networks such as Unity, Meta Audience Network, ironSource, and more.

• Unity IAP :

allows for the sale of virtual goods within free or paid games on all major platforms by enabling creators to create once and connect to all major platform stores (for example the Google Play Store and the Apple App Store), utilizing a convenient single integration.

Unity Software Inc.

Competitive Strengths

We believe the world is a better place with more creators in it and as champions of the creator, we make tools and provide services to enable the greater success of creation.

We believe that this philosophy is one of a number of competitive strengths that will enable our market leadership to grow.

Additionally, our competitive strengths include:

Our core competitive strength is the breadth and depth of our platform.

We offer a comprehensive set of solutions to create, run and monetize RT3D games and applications.

Creators can onboard through any of our solutions and leverage our platform to serve their needs at every stage of growth.

To help our creators succeed, we provide access to comprehensive learning resources and guided onboarding to our extensive community.

As a result of the strength of our platform, in the fourth quarter of 2021, we had, on average, approximately 3.9 billion monthly active end users who consumed content created or operated with our solutions on over 20 platforms, up 44% from a year earlier.

We saw an average of more than 9,000 new projects each day in 2021.

Market Leadership in Game Development with Industry-Leading Brand

We are the market leader for the creation of all types of video games, ranging from games developed by the largest global publishers, including AAA studios, to games developed by mid-sized, small and independent developers and freelancers.

We see significant opportunities for expansion within these existing customers through increased Create Solutions subscriptions and additional adoption of our Operate Solutions.

Games developed on the Unity platform record an average of over seven billion hours of gameplay per month in the year ended December 31, 2021.

Many of the most successful games across the globe were developed using Unity.

We believe that the Unity brand is synonymous with RT3D game development.

The brand recognition we have achieved with creators in gaming is also helping to drive adoption of Unity in industries such as architecture, engineering, construction, automotive, transportation, manufacturing, film, television, and retail.

Relentless Focus on Innovation, Talent, and Research and Development

Our market-leading position and reputation for innovation support our ability to recruit highly talented software engineers and developers.

We invest in both the improvement of our existing products, as well as in research that we believe will lead to the development of important new products to expand and enhance our platform.

As an example, the Unity Simulation product started as a research project and we believe it will drive future applications of RT3D in many new use cases, including autonomous driving, robotics, industrial automation, and virtual reality-based education and training.

Additionally, although the significant majority of our revenue growth has been organic, we have completed over a dozen acquisitions to date.

Acquisitions have primarily included smaller teams with specific product expertise.

Our Parsec, Speedtree, Finger Food Studios Inc.

(“Finger Food”), Multiplay, and Vivox acquisitions brought greater functionality into our platform, added key innovation talent to our team and furthered our goal of being the one-stop integrated platform for all creator needs.

In late 2021, we completed the acquisition of Weta Digital's tools, pipeline, technology, and engineering talent.

Ultimately, the acquisition is designed to put Weta Digital's exclusive and sophisticated visual effects tools into the hands of millions of creators and artists around the world, and once integrated into the Unity platform, enable the next generation of RT3D creativity.

We help our customers grow their businesses in the mobile app ecosystem, from pre-launch testing to user acquisition, growth and retention.

We do so by offering a mediation platform, which enables mobile app developers to monetize their apps through a variety of ad formats and maximize their ad revenue by leveraging multiple ad networks.

In addition, we offer robust cross-channel marketing solutions, which enable developers to scale their user base by promoting their apps on our own and external ad networks, mobile devices, and on social media and search channels such as Apple Search Ads.

Finally, we offer analytics and optimization tools designed to enable developers to grow their profitability sustainably over the long term.

Following the ironSource Merger, ironSource forms part of our Grow Solutions (which we generally referred to prior to the acquisition as Operate Solutions).

Unity Software Inc.

Extensive Data Footprint and Sophisticated Analytics

Our scale affords us access to a vast amount of end-user engagement and platform performance data.

We continuously capture and analyze valuable end-user behavior and application performance data from in-app events across more than 20 different platforms as end-users interact with games and applications made with Unity.

This data and analytics capability allows us to optimize content performance, end-user acquisition and engagement and monetization based on predicted lifetime values of our customers’ end-users, driving value for both our customers as well as their end-users.

The Unity Creator Community

Unity has a very large, active global community of RT3D creators, with approximately 1.6 million monthly active creators in the year ended December 31, 2021.

We have a highly engaged base of creators, with users of our Unity Pro product spending an average of five hours per day actively using our platform in the year ended December 31, 2021.

Our Customers and Creator Community

Our globally diverse customers range from the largest enterprises to mid-market companies, to government and non-profit institutions, to mid-sized, small, and independent businesses and individuals across a variety of industries.

We have a very large, active, and highly engaged global community of RT3D creators.

The scale of our creator community provides us with a significant competitive advantage, and by incentivizing third-party platforms to strategically partner and integrate with us, we are able to further expand our community.

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These partnerships help us to maximize audience-reach for our customers and retain our platform’s position as the leading hub for RT3D content creation.

The Unity creator community has grown rapidly.

We maintain a common forum for creators of all types to collaborate on content and learn from each other.

Further, we invest significant resources to enable the community’s success by hosting Unite conferences on multiple continents on a regular basis.

These events bring together Unity creators, experts, and industry leaders to unlock the full creative potential of our platform.

In addition, within our creator base are a large number of students and independent learners, including those enrolled in high school and university classes.

We invest in providing student and school licenses as well as developing curriculum components, Unity-specific portions of academic programs and learning content to ensure students can learn and train on our software.

With this knowledge and continuing education, students prepare for, and excel in, careers using RT3D and Unity.

Our Customers

Our globally diverse customers range from the largest enterprises to mid-market companies, to government and non-profit institutions, to mid-sized, small, and independent businesses and individuals.

As of December 31, 2021, we had 1,052 customers with over $100,000 in trailing 12-month revenue, who together represented the substantial majority of our revenue.

We define a customer as an individual or entity that generated revenue during the measurement period.

A single organization with multiple divisions, segments, or subsidiaries is generally counted as a single customer, even though we may enter into commercial agreements with multiple parties within that organization.

For example, one of our large enterprise customers is Zynga.

We consider all Unity subscriptions and services purchased by Zynga-owned studios to be purchased by Zynga as a single customer.

For each of the three years in the period ended December 31, 2021, 2020, and 2019, 37%, 36%, and 34% of our revenue was generated by customers in EMEA, respectively.

For each of the three years in the period ended December 31, 2021, 2020, and 2019, 35%, 34%, and 33% of our revenue was generated by customers in Asia-Pacific, respectively.

For each of the three years in the period ended December 31, 2021, 2020, and 2019, 27%, 30%, and 33% of our revenue was generated by customers in the Americas, respectively.

No one customer accounted for more than 10% of our revenue in the years ended December 31, 2021, 2020, and 2019.

Unity Software Inc.

Community Support

We believe that highly responsive and effective support and education are an extension of our brand and are core to building and maintaining creator loyalty and trust.

Our community support team assists creators using both the free and paid versions of our Create Solutions to drive adoption, subscription renewal and free-to-paid conversion.

Additionally, our customer experience team receives and quantifies feedback from brands, agencies and studios using Unity at scale.

This focus on responsiveness and personal touch helps us improve customer satisfaction and identify high-value opportunities for product improvements.

We tier our support levels based on customer size.

Creators using our free solutions have access to chat, e-mail, and web-based community resources, while paid customers have access to additional levels of higher-touch support.

Our community resources serve as the foundation for all of our levels of support, giving creators the opportunity to discuss challenges and solutions with experienced Unity creators and interact with our expert support team via:

the central hub of our community discussions.

Creators can voice their opinions, show what they are working on and ask for advice.

our self-service repository for all solutions relating to common questions on products and workflows.

• Documentation:

available from within the product, our documentation, which is translated into four languages, covers how to use every component in Unity.

Our customer success team supports our large customers through every step of their journey with Unity.

This starts with onboarding and sharing of best practices, as well as product education, and continues with support for renewals and introductions to additional Unity products and solutions.

We have teams dedicated to providing specialized support for each of our products.

Our educational offerings include a range of free, web-based classes and tutorials on how to use, administer, optimize and customize Unity.

We also offer in-person training through our developer relations program and at our Unity-hosted community events.

Our Unite conferences and participation in various developer-centric conferences provide creators with tangible skills to launch, market, and monetize successful games and applications.

Sales and Marketing

Our go-to-market approach is driven by the strength of our brand, organic creator demand, targeted account-based marketing, and a solutions-oriented sales process.

We execute a multi-channel model that enables a targeted and cost-effective approach.

We combine a web-based system for smaller customers with direct sales efforts for acquiring and expanding product and service penetration within small and medium-sized businesses and enterprise customers.

This strategy is supported by a highly effective customer and community support ecosystem and by education programs.

We use our global direct sales force to acquire new medium to enterprise-sized customers and increase adoption of products and services within these customers.

Our enterprise sales, customer success, and field engineering teams have deep domain expertise in the industries they serve.

For mid-sized, small, and independent companies, we leverage a lower-cost inside sales team and an indirect value-added reseller network to cost-effectively reach these customers.

We also deploy technical professionals in our worldwide Professional Services group who help our customers to complete the development of content made with Unity and facilitate the process of deploying RT3D in both gaming and other industries.

Unity Software Inc.

In addition to a globally distributed direct sales force, our sales and marketing strategies include solutions engineering, lead generation campaigns, webinars, and cooperative marketing efforts with our strategic partners.

When we can, we offer global Unite conferences, which give creators the opportunity to directly engage with the company, access expertise and product knowledge, and hear from industry leaders on how to make the most of Unity's platform.

Digital Channel

We reach independent creators and mid-sized, small, and independent studios through our self-service web-based channel.

We deploy a range of marketing strategies and tactics to drive initial awareness, adoption, and retention.

These include online evangelism, our Made with Unity sub-brand and learning programs for enthusiasts and students.

New creators often start by using our free Unity Personal or Unity Student plans.

We encourage continued creator engagement by providing free resources, such as creator education, Asset Store access, and enrollment into our network of Unity creators.

Customers do not need to upgrade to a paid plan until they reach $100,000 in annual revenue or funding.

For our Operate Solutions, we enable customers to easily get started by providing a self-service platform for our monetization solutions and free use of our Vivox product for up to 5,000 concurrent users.

The majority of our Operate Solutions customers are onboarded through our self-serve platform and require minimal upfront investment to get started.

Many of our free users become champions for Unity, creating word-of-mouth advertising for our products and services.

As creators engage more deeply with Unity, they often upgrade to paid plans via our website or sales teams.

We support this upgrade path through targeted marketing campaigns and in-product prompts highlighting the added benefits and features of our paid plans.

The significant majority of Unity’s monthly active creators are free users, and we see this as an opportunity for future growth.

Strategic Relationships

We have a robust and diverse partner ecosystem that includes leading hardware, operating system, device, game console, and other technology providers.

Our partners benefit from their relationship with us through growth in engagement of our customers with their ecosystem.

Our partner ecosystem is critical to our create once and deploy anywhere value proposition to our customers and is an important part of our go-to-market strategy.

Partners also serve as a source of brand awareness and sales leads in new industries, and help to accelerate our sales cycles through co-marketing programs.

Research and Development

Our engineering and product teams and culture are customer-oriented and work alongside customers to deliver high value, high quality features and functionality across the numerous devices and platforms we support.

We deliver these features through frequent updates to our Create and Operate Solutions that align with each type and version of platform, including updates to mobile, PC, virtual reality platforms, and more.

Our research and development efforts are distributed around the world and focus on a number of areas including, but not limited to, our core engine, Operate Solutions, vertical solutions, and AI and simulation tools.

Combined with our support for numerous platforms, we have also developed significant expertise in build, test, and deployment tools, technologies and automation, for both traditional, native-code, monolithic repositories as well as package-based, cloud hosted packages.

These tools enable us to work independently and efficiently and maintain a rapid sustained pace of innovation.

Over the last two years, we have invested more than $1.0 billion in research and development to build our platform.

We had 3,038 employees involved in research and development and related activities as of December 31, 2021, which accounted for 58% of our total headcount.

Unity Software Inc.

We primarily compete with other content development tools and monetization services.

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Outside of gaming, we also compete with other development platforms that offer 2D and 3D design products.

• Operate Solutions:

With respect to our Operate Solutions, we operate in a fragmented ecosystem composed of select divisions of large, well-established companies as well as privately held companies.

• Grow Solutions:

We operate in a fragmented ecosystem composed of privately held companies up to select divisions of large, well-established companies.

The large companies in our ecosystem may play multiple different roles given the breadth of their business.

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Most of these companies are also our partners and customers.

Examples of other companies we compete against include AppLovin, Voodoo, and Digital Turbine.

We believe that the principal competitive factors in our market are:

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We believe we compete favorably with respect to these factors.

Technology Infrastructure and Operations

We have built our technology infrastructure using a distributed and scalable architecture on a global scale.

We designed our technology platform with multiple layers of redundancy to guard against data loss and to deliver high availability and low latency.

Incremental backups are performed twice a day and full backups are performed daily.

Backups are preserved for a time period directly proportional to the criticality of the data.

Redundant copies of content are stored in several geographically separate regions and are replicated within each region.

Data is transmitted in encrypted form.

We mainly use Google Cloud Platform as our processing and delivery cloud infrastructure but also have some services with other cloud infrastructure providers and some with special hardware/security requirements running on our own private data center.

With respect to the Google Cloud Platform, we are party to a cloud service agreement with Google, pursuant to which we are committed to spend an aggregate of $700.0 million between September 2021 and September 2026.

If we fail to meet the minimum purchase commitment during any year, we are required to pay the difference.

Either we or Google may terminate the agreement if the other party is in material breach and fails to cure the breach within 30 days after receiving written notice.

We expect to meet our remaining commitment under this agreement.

Refer to "Item 1A.

Risk Factors" for a discussion of risks related to competition.

Unity Software Inc.

We have built a service operations infrastructure with automated, 24x7 telemetry, supported by a team to help ensure that any issues that arise with our services are addressed as quickly as possible.

Security, Privacy, and Data Protection

At Unity we understand that creative assets, performance and user data are critical to our customers’ businesses.

Privacy and Data Security

Creative assets, performance and user data are critical to our customers’ businesses.

We devote considerable resources to our security program, regularly testing the security of user assets utilized by our services, and developing easy-to-use features that content creators can leverage to enhance the security of their creative products.

Our team of security practitioners, working in partnership with peers across our company, works to identify and mitigate risks, assess our security measures against industry standards and best practices, and continue to evaluate ways to improve.

We focus on four core components:

Application Security, Infrastructure Security, Incident Response, and Governance and Compliance.

In addition to these core components, we drive a program of Responsible Disclosure to engage and gain support of the research community to identify advanced issues for remediation.

Our security program is focused on expanding our documentation and audit functions in order to ready us for industry certifications that will be important for our growth in industrial and government markets.

Privacy and Data Protection

The privacy of developers and application users and the protection of the data in our ecosystem are important to Unity’s continued growth and success.

The privacy of developers and application users and the protection of the data in our ecosystem are important to our continued growth and success.

We conduct privacy impact assessments and data protection impact assessments, conduct product and feature reviews, maintain records of data processing, and provide support for privacy and data security-related requests.

We maintain a dedicated privacy team that leads a group of employees, federated throughout the organization, who serve in roles responsible for data governance and management within product groups and functional areas.

We conduct privacy impact assessments and data protection impact assessments, conduct product and feature reviews, maintain a reasonably exhaustive list of data collected and processed, and provide support for data protection and privacy-related requests.

Our privacy team reports progress on the program and its functions quarterly to a team of executives charged with data governance oversight, and conducts regular privacy-related training.

Additionally, our Data Protection Officer periodically updates the audit committee of our board of directors on changes in laws and Unity’s compliance activities.

We are committed to complying, and helping our customers comply, with data protection laws globally.

We are committed to complying, and helping our customers comply, with privacy and data security laws globally.

We monitor guidance from industry and regulatory bodies, meet with regulators and update our product features and contractual commitments when necessary to meet new or evolving privacy legal requirements.

We maintain a privacy policy that describes how Unity collects, uses, and discloses information, and what choices organizations and users have.

Because our business involves the collection, use, storage, and transmission of personal information, we are subject to numerous federal, state, local, and foreign laws, regulations, and other obligations relating to privacy, data protection, and data security.

Such laws may include Section 5(a) of the Federal Trade Commission Act, the California Consumer Privacy Act of 2018, the California Privacy Rights Act of 2020, the California Online Privacy Protection Act, the European Union’s General Data Protection Regulation 2016/679 ("EU GDPR"), the EU GDPR as it forms part of United Kingdom ("UK") law by virtue of section 3 of the European Union (Withdrawal) Act 2018 ("UK GDPR"), and the European Union's ePrivacy Directive.

Countries around the world have adopted or are proposing similar laws and regulations relating to privacy, data protection, and data security, and we may become subject to them as we expand our operations into new geographic markets.

Countries around the world have adopted or are proposing similar laws and regulations relating to privacy and data security, and we may become subject to them as we expand our operations into new geographic markets.

Refer to "Item 1A.

Risk Factors" for a discussion of risks related to privacy and data security.

Intellectual Property

We rely on a combination of patents, trademarks, copyrights, trade secrets, license agreements, confidentiality procedures, non-disclosure agreements, employee non-disclosure and invention assignment agreements, and other legal and contractual rights to establish and protect our proprietary rights.

Unity Software Inc.

Refer to "Item 1A.

Risk Factors" for a discussion of risks related to our intellectual property.

As of December 31, 2022, we had 193 issued utility patents in the United States that expire between 2031 and 2041, 41 issued utility patents in non-U.S.

jurisdictions, and 286 utility patent applications (including 15 provisional applications and 76 active PCT applications) pending in the United States and globally.

As of December 31, 2021, we also had 22 registered design patents in non-U.S.

jurisdictions and 18 active design patent applications, three of which are in the United States.

As of such date, we also had 29 registered design patents in non-U.S.

jurisdictions and 13 active design patent applications, four of which are in the United States.

While we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us as a whole.

We have trademark rights in our name and other brand indicia and have trademark registrations for select marks in the United States and other jurisdictions around the world.

We also have registered domain names for websites that we use in our business, such as www.unity.com and similar variations.

We also have trademark rights in our name and other brand indicia and have trademark registrations for select marks in the United States and other jurisdictions around the world, and registered domain names for websites that we use in our business.

We control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers and partners.

It is our practice to enter into confidentiality and invention assignment agreements (or similar agreements) with our employees, consultants, and contractors involved in the development of intellectual property on our behalf.

We also enter into confidentiality agreements with other third parties in order to limit access to, disclosure, and use of, our confidential information and proprietary information.

We further control the use of our proprietary technology and intellectual property through provisions in our terms of service.

We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.

Unity Software Inc.

Human Capital Management

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We also engage contractors and consultants.

We had 2,776 employees in technical roles, which accounted for 53% of our total headcount.

We had 3,753 employees in technical roles, which accounted for approximately 59% of our total headcount.

In addition, our geographic diversification enhances our ability to retain and attract talent, and as of December 31, 2022, approximately 73% of our full-time employees were located outside of the United States.

We believe the swift growth in numbers and the strength of our culture is fueled by our commitment to our values, inclusion, and social impact, making Unity an exceptional place for top talent to work and grow.

We believe that the strength of our culture is fueled by our commitment to our values, inclusion, and social impact, making Unity an attractive place for top talent to work and grow.

Our Values and Commitment to Inclusion

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Users First, Best Ideas Win, In It Together, and Go Bold.

• Users First :

We put users first, they are the reason we do what we do.

Our shared dedication to our customers holds us together, defines and aligns our work and drives us to deliver for them.

• Best Ideas Win :

We believe great ideas can come from anywhere.

We have vigorous debates, we listen and learn, and we make sure the best ideas win.

We care enough to go through the pain of messy conversations.

• In It Together :

We are Citizens of Unity.

We act like owners.

We’re activists;

we have a voice and use it.

We’re direct and candid, with good intent.

We deeply collaborate towards shared goals and respect each other’s unique contributions.

We do bold things.

We go big and when we fail, we learn, get better and go big again.

We challenge and elevate each other beyond our limits to do what may seem impossible.

We stay curious and hungry.

Unity Software Inc.

We live out these values through our global framework for Inclusion, which centers on three principles:

2 unchanged sentences

These principles cascade throughout our company and encourage us all to meet each other where we are and celebrate our differences.

• Empathy is the ability to recognize and validate the perspectives and experiences of others, even without connecting yourself to those experiences.

It’s about listening to understand—not to respond.

• Respect is rooting your efforts in empathy, by taking everyday actions that acknowledge individual experiences and perspectives.

• Opportunity is demonstrating respect for the knowledge and experience of others by empowering them to contribute, create or lead based on that knowledge and experience.

We invest in our culture in many ways, including a Unity Leadership Program run by senior leaders, frequent Town Hall meetings, executive roundtables, manager and employee development opportunities, and a global Workplace Experience team dedicated to curating local cultural events including yoga, meditation, coffee talks, and game nights.

Unity's benefit offerings are designed to meet the varied and evolving needs of a diverse workforce.

In response to COVID-19, we have enhanced the ways we help our employees care for themselves and their families through expanded mental health benefits and support for remote working.

We are continuing to build on our inclusive benefit offerings and programs, led by our Inclusion and Global Benefits teams.

Our Commitment to Social Impact

We love creators—those bold enough to create what is in their imagination to change the world.

Creators are change-makers and Unity is their platform for change.

Since our founding, we have focused on empowering our creators and employees to make the world a better place.

In October 2020, Unity launched Unity Social Impact, a division of the business aimed at empowering employees and creators of all backgrounds to foster a more inclusive, sustainable world.

Unity Social Impact consists of three pillars:

Education and Economic Opportunity for All, Sustainability, and Health and Well-being.

The announcement of the new division was underpinned by the establishment of the Unity Charitable Fund, a program that provides the financial mechanism to bring the goals of the Social Impact division to life.

Created in partnership with Tides Foundation at the time of our initial public offering, the Unity Charitable Fund was initially issued 750,000 shares of our common stock.

Government Regulations

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Risk Factors" for a discussion of these potential impacts.

Available Information

Our investor relations website is https://investors.unity.com/ and we encourage investors to use it as a way of easily finding information about us.

Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically on this website as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC.

Unity Software Inc.

Corporate Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of 1934, as amended.

The Securities and Exchange Commission (“SEC”) maintains a website at https://www.sec.gov that contains reports, and other information regarding us and other companies that file materials with the SEC electronically.

Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically through our investor relations website at https://investors.unity.com/ as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business