Risks Related to Our Business, Operations, and Industry
−Removed: We have a history of losses and may not achieve or sustain profitability in the future.
+Added: We have a history of losses and may not achieve or sustain profitability on a GAAP basis in the future.
We have experienced significant net losses on a GAAP basis in each period since inception.
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We are not certain whether we will achieve or maintain profitability in the future.
−Removed: We also expect our costs and expenses to increase in the long term on a GAAP basis, which could negatively affect our future results of operations.
−Removed: In particular, we intend to continue to make significant investments to achieve profitability in such areas as:
−Removed: • research and development, including investments in our engineering teams and in further differentiating our platform and solutions with improvements to our Create and Grow Solutions, as well as the development of new products and features;
+Added: We are engaging in cost cutting efforts, but our costs and expenses may increase in the long term on a GAAP basis, which could negatively affect our future results of operations.
+Added: In addition, we may continue to make investments in such areas as:
+Added: • research and development, including investments in our engineering teams and in further differentiating our platform and solutions with improvements to our Create and Grow Solutions, as well as the development of new solutions and features;
• our sales and marketing organizations to engage our existing and prospective customers, increase brand awareness and drive adoption and expansion of our platform and solutions;
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• global expansion;
−Removed: • our general and administration organization, including legal, IT, and accounting expenses associated with ongoing a public company compliance and reporting obligations.
+Added: • our general and administration organization, including legal, IT, and accounting expenses associated with ongoing public company compliance and reporting obligations, including maintaining proper and effective internal controls over financial reporting.
Our efforts to achieve profitability may be costlier than we expect and may not be effective.
−Removed: Even if such investments increase our revenue, any such increase may not be enough to offset increased operating expenses even with cost-cutting efforts, such as layoffs, which may not be effective.
−Removed: We have a limited history operating our business at its current scale, including with ironSource, and as a result, our past results may not be indicative of future operating performance.
−Removed: In recent years, we have significantly grown the scale of our business, both organically and through acquisitions, including the ironSource Merger.
−Removed: Accordingly, we have a limited history operating our business at its current scale and scope.
+Added: Even if such investments increase our revenue, any such increase may not be enough to offset increased operating expenses.
+Added: Cost-cutting efforts, such as discontinuing certain product offerings, reducing our workforce or reducing our office footprint layoffs, may not be effective or may not be effective on the timelines we expect.
+Added: If we fail to successfully execute our plans to reset our portfolio to focus on our strategic portfolio and to right-size our investments, our business will be harmed.
+Added: We are resetting our portfolio to focus on the Unity Engine and Monetization solutions as well as AI, exiting other businesses and right-sizing our investments.
+Added: These efforts may not be effective or sufficient to offset our expenses, and may themselves have adverse impacts, such as loss of continuity or accumulated knowledge, inefficiency during transitional periods, distraction, and potential challenges operating our business with fewer resources.
+Added: For example, we recently announced plans to restructure, which included a reduction in approximately 25% of our employee workforce, and the departure of certain
+Added: Unity Software Inc.
+Added: members of our management team, including the ironSource founders from their operational roles.
+Added: The departure of these employees may create a loss of accumulated knowledge, inefficiency, and other challenges to operating our business.
+Added: If we fail to efficiently execute on these plans to restructure, or if the benefits from these efforts are not achieved on the timeline we expect, we may fail to achieve or maintain profitability.
+Added: We have a limited history operating our business at its current scale, and as a result, our past results may not be indicative of future operating performance.
+Added: We have a limited history operating our business at its current scale and scope.
You should not rely on our past results of operations as indicators of future performance.
Overall growth of our revenue is difficult to predict and depends in part on our ability to execute on our integration of ironSource and other growth strategies.
−Removed: For example, in the second and third quarters of 2022, our growth rate declined below our target long-term growth due to a variety of factors which could continue to impact our business, including the maturation of our business.
−Removed: In addition, recent negative macroeconomic factors, such as inflation and corresponding higher interest rates, and the strengthening of the U.S.
−Removed: dollar, have and may continue to negatively impact our business, as could the softening of the advertising market.
You should consider and evaluate our prospects in light of the risks and uncertainties frequently encountered by growing companies in rapidly evolving markets.
These risks and uncertainties include challenges in accurate financial planning as a result of limited historical data relevant to the current scale and scope of our business and the uncertainties resulting from having had a relatively limited time period in which to implement and evaluate our business strategies as compared to companies with longer operating histories.
−Removed: Unity Software Inc.
If we are not able to grow efficiently and manage our costs, we may not achieve profitability on a GAAP basis.
−Removed: The growth and expansion of our business places a continuous significant strain on our management, operational and financial resources.
−Removed: As usage of our platform grows, we will need to devote additional resources to improving its capabilities, features and functionality.
−Removed: In addition, we will need to appropriately scale our internal business, IT, and financial, operating and administrative systems to serve our growing customer base, and continue to manage headcount, capital and operating and reporting processes, and integrate them with ironSource's, in an efficient manner.
+Added: We are aiming to achieve and maintain profitability on a GAAP basis.
+Added: To do so, we need to continuously improve our platform’s capabilities, features and functionality.
+Added: In addition, we will need to appropriately scale our internal business, IT, and financial, operating and administrative systems to serve our growing customer base, while continuing to manage headcount, capital and operating and reporting processes, and continue to integrate them with ironSource's, in an efficient manner.
Any failure of or delay in these efforts could result in impaired performance and reduced customer satisfaction, resulting in decreased sales to new customers or lower dollar-based net expansion rates, which would hurt our revenue growth and our reputation.
−Removed: Further, any failure in optimizing the costs associated with our third-party cloud services as we scale could negatively impact our gross margins.
−Removed: Even if we are successful in our expansion efforts, they will be expensive and complex, and require the dedication of significant management time and attention.
+Added: Further, any failure in optimizing the costs associated with our third-party cloud services could negatively impact our gross margins.
+Added: Even if we are successful in our efforts to grow and expand, such efforts will be expensive and complex, and require the dedication of significant management time and attention.
We may also suffer inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure.
−Removed: We cannot be sure that the expansion of and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could harm our business, financial condition and results of operations.
−Removed: While growing our business necessarily requires increased costs in some parts of our business, we are also focusing on cost reduction efforts where possible.
−Removed: However, our cost reduction efforts may not be effective or sufficient to offset our increased expenses, and may themselves have adverse impacts, such as loss of continuity or accumulated knowledge, inefficiency during transitional periods, distraction, and potential challenges operating our business with fewer resources.
−Removed: Any failure of our cost reduction efforts could harm our business, financial condition and results of operations.
−Removed: If our revenue growth does not meet our expectations in future periods and if we are unable to allocate our resources in a manner that results in sustainable revenue growth, while also managing our overall costs, we may not achieve or maintain profitability.
−Removed: We may fail to realize all of the anticipated benefits of the ironSource Merger, or those benefits may take longer to realize than expected.
−Removed: We believe that there are significant benefits and synergies that may be realized through leveraging the products, scale and combined enterprise customer bases of Unity and ironSource.
+Added: Cost-cutting interventions and improvements to our internal infrastructure to offset expenses may not be effectively implemented on a timely basis, and such failures could harm our business, financial condition and results of operations.
+Added: We may fail to realize the possible synergies between our Create and Grow Solutions, including the benefits of the ironSource Merger, or those synergies may take longer to realize than expected.
+Added: We believe that there are significant benefits and synergies that may be realized through leveraging our Create and Grow Solutions.
However, the efforts to realize these benefits and synergies is a complex process and may disrupt our existing operations if not implemented in a timely and efficient manner.
−Removed: The full benefits of the ironSource Merger, including the anticipated sales or growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all.
+Added: The full benefits of these synergies, including those from the ironSource Merger, may not be realized as expected or may not be achieved within the anticipated time frame, or at all.
In addition, we may incur additional or unexpected costs in order to realize these revenue synergies.
−Removed: Failure to achieve the anticipated benefits of the ironSource Merger could adversely affect our results of operations or cash flows, cause dilution to our earnings per share, decrease or delay any accretive effect of the ironSource Merger and negatively impact our stock price.
−Removed: Our success will depend, in part, on our ability to manage our expansion, which poses numerous risks and uncertainties, including the need to integrate the operations and business of ironSource into our existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with industry contacts and business partners.
−Removed: In addition, we are devoting significant attention and resources to the integration and operation of the combined company, and to successfully aligning the business practices and operations of Unity and ironSource.
−Removed: This process may disrupt the businesses and, if ineffective, would limit the anticipated benefits of the ironSource Merger.
+Added: Failure to achieve these synergies could adversely affect our results of operations or cash flows, cause dilution to our earnings per share, and negatively impact our stock price.
+Added: Our success will depend, in part, on our ability to manage our expansion, which poses numerous risks and uncertainties, including the ongoing integration of the operations and business of ironSource into our existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with industry contacts and business partners.
+Added: We are devoting significant attention and resources to the integration and operation of the combined company, and to successfully aligning the business practices and operations of Unity and ironSource, in order to recognize the synergies between our Create and Grow Solutions.
Unity Software Inc.
−Removed: Acquisitions, mergers, strategic investments, partnerships, and alliances could be difficult to identify, integrate, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business.
−Removed: We have in the past acquired or invested and may in the future seek to acquire or invest in businesses, joint ventures, platforms, or technologies that we believe could complement or expand our platform, enhance our technical capabilities, or otherwise offer growth opportunities.
−Removed: We have grown our revenue organically and through acquisitions including Parsec, Weta Digital, and ironSource.
−Removed: Our acquisitions and mergers have placed and will continue to place added burden on our management and internal resources, and the diversion of management's attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could adversely affect our financial results.
−Removed: We may encounter difficulties assimilating or integrating any acquired companies or assets, particularly if the key personnel of an acquired company choose not to work for us, face cultural challenges, if their software or technology is not easily adapted to work with our platform, or we have difficulty retaining the customers of any acquired business.
−Removed: In addition, we have invested and may in the future invest in private companies and may not realize a return on our investments.
−Removed: We have incurred significant costs, expenses and fees for professional services and other transaction costs in connection with the Weta Digital Acquisition and the ironSource Merger.
−Removed: We may also incur unanticipated costs in the integration of certain of Weta Digital's assets and of ironSource with our business.
−Removed: The substantial majority of these costs will be non-recurring expenses relating to the Weta Digital Acquisition and the ironSource Merger.
−Removed: We have been subject to litigation related to the ironSource Merger and could become subject to further litigation related to it or any other acquisition, which could result in significant costs and expenses.
−Removed: These and any future transactions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our existing business.
−Removed: Any such transactions that we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial.
−Removed: In addition, we may not be able to find and identify desirable acquisition targets or business opportunities or be successful in entering into an agreement with any particular strategic partner.
−Removed: These transactions have historically resulted and in the future could result in dilutive issuances of equity securities or the incurrence of debt, contingent liabilities, amortization expenses, incremental operating expenses, or the impairment of goodwill, any of which could adversely affect our results of operations.
−Removed: In addition, if the resulting business from such a transaction fails to meet our expectations, our business, financial condition and results of operations may be adversely affected or we may be exposed to unknown risks or liabilities and our efforts to limit such liabilities could be unsuccessful.
−Removed: If we are unable to retain our existing customers–including ironSource customers–and expand their use of our platform, or attract new customers, our growth and operating results could be adversely affected, and we may be required to reconsider our growth strategy.
+Added: If we are unable to retain our existing customers and expand their use of our platform, or attract new customers, our growth and operating results could be adversely affected, and we may be required to reconsider our growth strategy.
Our future success depends on our ability to retain our existing customers, expand their use of our platform and attract new customers.
−Removed: Our targeted marketing efforts may not be successful despite the resources we devote to them.
−Removed: Unity Software Inc.
+Added: Our marketing efforts may not be successful despite the resources we devote to them.
We derive a significant portion of our revenue from our Grow Solutions, and such revenue is primarily generated under a revenue-share or profit-share model.
Under such models, our customers depend on us as a source of their own revenue, which in some cases may represent a significant portion of their revenue.
−Removed: Should customers lose confidence in the value or effectiveness of our monetization products or if our Grow products are less effective, consumption of these products could decline.
−Removed: For example, our revenue growth in the first half of 2022 was negatively impacted by challenges with our Grow products (including a fault in our platform that resulted in reduced accuracy of one of our monetization tools, as well as the consequences of ingesting bad data from a large customer) that reduced the efficacy of such products.
+Added: Should customers lose confidence in the value or effectiveness of our Monetization solutions or if our Grow Solutions are less effective, consumption of these offerings could decline.
+Added: For example, our revenue growth in the first half of 2022 was negatively impacted by challenges with certain of our Grow Solutions (including a fault in our platform that resulted in reduced accuracy of one of our monetization tools, as well as the consequences of ingesting bad data from a large customer) that reduced the efficacy of such products.
We focused our resources on addressing the data quality and accuracy challenges we observed with certain monetization tools in the first quarter of 2022.
−Removed: Our interventions to address such challenges through the fourth quarter of 2022 have been effective;
−Removed: however, external factors, including the competitive landscape, recent negative macroeconomic conditions, longer sales cycles, and reduced advertiser spend have prolonged our recovery and lead us to believe that the growth of our Grow Solutions revenue will be adversely impacted into 2023.
+Added: Our interventions to address such challenges were effective;
+Added: however, external factors, including the competitive landscape, negative macroeconomic conditions, longer sales cycles, and reduced advertiser spend prolonged our recovery and negatively impacted the growth of our Grow Solutions.
We must continually add new features and functionality to our Grow Solutions to remain competitive and respond to our customers' needs.
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In addition, if we fail to attract or retain existing ironSource customers into our Grow Solutions, our business could be harmed.
−Removed: Our Grow Solutions is also dependent upon the continued proliferation of mobile connected devices, such as smartphones and tablets, which can connect to the Internet over a cellular, wireless or other network, as well as the increased consumption of content through those devices.
+Added: Our Grow Solutions are also dependent upon the continued proliferation of mobile connected devices, such as smartphones and tablets, as well as the increased consumption of content through those devices.
Consumer usage of these mobile connected devices may be inhibited for a number of reasons beyond our control.
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Create Solutions customers have no obligation to renew their subscriptions, which are primarily one to three years in length, after they expire, and have no obligation to continue using our Grow Solutions, which are primarily sold under revenue-share or profit-share-based models.
−Removed: Even if one or several studios within a customer adopts our Create or Grow Solutions, other studios within that customer may choose to adopt different solutions or to continue to employ internally-developed solutions.
−Removed: Our customers rely on us to attract a broad range of advertisers to our platform to generate demand for their impressions through our Unified Auction.
−Removed: If we are unable to also serve the needs of advertisers, they may reduce their consumption of our solutions and, because the advertising market is highly competitive, they may shift their business to other advertising solutions which could adversely affect our revenue.
−Removed: All of our products are also subject to factors and events beyond our control.
−Removed: For example, macroeconomic factors like labor shortages, supply chain disruptions, and inflation continue to cause logistical challenges, increased input costs, and inventory constraints for advertisers, and these factors are currently decreasing, and may in the future decrease or halt, advertiser spending.
−Removed: For us to maintain or improve our results of operations, it is important that our Create Solutions customers renew and expand their subscriptions with us and that our Grow Solutions customers continue using and expanding their use of our products.
−Removed: We invest in targeted sales and account-based marketing efforts to identify opportunities to grow use of our solutions within and across multiple studios within a single customer.
+Added: In the third quarter of 2023 we announced changes to our pricing model for our Create Solutions, which will become effective for users of the next major release of the software expected to be available in 2024.
+Added: We experienced a high volume of negative customer feedback including a boycott and a slowdown of signing new contracts and renewals as a result of these changes, which we believe negatively impacted our Grow Solutions revenue in the second half of 2023.
+Added: If we fail to recover or reengage our customers or fail to attract new customers as a result of this announcement, our business could be harmed.
+Added: Our Grow Solutions customers rely on us to attract a broad range of advertisers to our platform to generate demand for their impressions through our offerings such as LevelPlay, Unity Ads, and Sonic.
+Added: If we are unable to also serve the needs of advertisers, they may reduce their consumption of our solutions and, because the advertising market is highly competitive, they may shift their business to other advertising solutions or supply paths, which could adversely affect our revenue.
+Added: All of our offerings are also subject to factors and events beyond our control.
+Added: Macroeconomic factors like labor shortages, supply chain disruptions, and inflation continue to cause logistical challenges, increased input costs, and inventory constraints for advertisers.
+Added: These factors have in the past decreased, and may in the future decrease or halt, advertiser spending.
+Added: For us to maintain or improve our results of operations, it is important that our Create Solutions customers renew and expand their subscriptions with us and that our Grow Solutions customers continue using and expanding their use of our solutions.
+Added: We invest in targeted sales and account-based marketing efforts to identify opportunities to grow use of our solutions within and across multiple studios within a
+Added: Unity Software Inc.
+Added: single customer.
However, our efforts may not be successful despite the resources we devote to them.
−Removed: Even if one or several studios within a customer adopts our Create or Grow Solutions, other studios within that customer may choose to adopt different solutions or to continue to employ internally-developed solutions.
+Added: Even if one or several studios within a customer adopt our Create or Grow Solutions, other studios within that customer may choose to adopt different solutions or to continue to employ internally-developed solutions.
It is also important for us to cross-sell more Create Solutions to our Grow Solutions customers, as well as Grow Solutions to our Create Solutions customers.
−Removed: While we believe there are significant cross-selling opportunities between our Create and Grow Solutions, and that our Create and Grow Solutions work together synergistically, we have only recently focused our sales efforts on targeting cross-selling opportunities, and we cannot be sure that our efforts will be successful.
−Removed: Unity Software Inc.
+Added: While we believe there are significant cross-selling opportunities between our Create and Grow Solutions, and that our Create and Grow Solutions work together synergistically, our efforts to cross-sell may not be successful.
The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed.
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• intense competition within the gaming market which may impact our company and a significant number of our customers, who also operate in the gaming market;
−Removed: • the introduction of alternative solutions by larger, more experienced companies that offer 2D and 3D design products in the industries in which we may expand into;
−Removed: • rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences.
+Added: • the introduction of alternative solutions by larger, more experienced companies that offer 2D and 3D design solutions in the industries in which we may expand into;
+Added: • rapid technological change, such as the rise of AI and machine learning, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences.
Our competitors may have greater name recognition, longer operating histories, more established customer relationships, larger marketing budgets and greater financial and operational resources than we do.
We cannot assure you that we will not be forced to engage in price-cutting or revenue limiting initiatives, change payment terms or increase our advertising and other expenses to attract and retain customers in response to competitive pressures.
+Added: For example, in the third quarter of 2023 we announced changes to our pricing model for our Create Solutions, which will become effective for users of the next major release of the software expected to be available in 2024.
+Added: We experienced a high volume of negative customer feedback including a boycott and a slowdown of signing new contracts and renewals as a result of these changes.
+Added: If we fail to recover or reengage our customers, or fail to attract new customers, as a result of this announcement, our business could be harmed.
For all of these reasons, we may not be able to compete successfully against our current or future competitors, which could result in the failure of our platform to continue to achieve or maintain market acceptance, which would harm our business, financial condition, and results of operations.
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The variables that affect the calculation of our market opportunity are also subject to change over time.
−Removed: Estimates of market opportunity in industries beyond gaming are particularly uncertain, given the earlier stage of adoption of solutions for RT3D content creation in those markets.
−Removed: Our estimates of the market opportunity that we can address outside gaming depend on a variety of factors, including the number of software developers, architects and engineers that are potential users of our products.
−Removed: We cannot be sure that the industries in which these developers, architects or engineers are employed will adopt RT3D generally, or our solutions specifically, to any particular extent or at any particular rate.
Unity Software Inc.
−Removed: Our expectations regarding potential future market opportunities that we may be able to address are subject to even greater uncertainty.
−Removed: For example, our expectations regarding future market opportunities in gaming depend, among other things, on the extent to which we are able to develop new products and features that expand the applicability of our platform.
−Removed: In addition, our expectations regarding future market opportunities represented by augmented reality and virtual reality applications are subject to uncertainties relating from the fact that such applications are at relatively early stages of development and may not grow at the rates we expect.
−Removed: The extent to which engineers, technicians or other potential users of our products in industries outside gaming are representative of other future market opportunities will depend on those industries having use cases that can be served by RT3D content.
−Removed: Our ability to address those opportunities will depend on our developing products that are responsive to those use cases.
−Removed: In addition, there is significant uncertainty with respect to our estimate of the amount by which the acquisition of Weta Digital or the ironSource Merger will increase our total market opportunity, which is based on internal models and assumptions.
−Removed: For example, with respect to Weta Digital, our model assumes that there is a significant market opportunity among consumers as well as professional artists for digital visual effects solutions.
We cannot assure you that any particular number or percentage of addressable users or companies covered by our market opportunity estimates will purchase our solutions at all or generate any particular level of revenue for us.
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Operating system platform providers or application stores may change terms of service, policies or technical requirements applicable to us or our customers, which could adversely impact our business.
−Removed: We and our customers are subject to the standard policies and terms of service of the operating system platforms on which we create, run and monetize applications and content, as well as policies and terms of service of the various application stores, such as the Apple App Store or Google Play Store, that make applications and content available to end users.
+Added: We and our customers are subject to the standard policies and terms of service of the operating system platforms on which we create, run and monetize applications and content, as well as policies and terms of service of the various application stores, such as the Apple App Store or Google Play Store, which make applications and content available to end users.
Each of these operating system platforms and stores has broad discretion to change and interpret its terms of service and policies.
−Removed: An operating system platform or application store may also change its fee structure, add fees associated with access to and use of its platform, alter how customers are able to advertise or monetize on their platform, change how the personal or other user information is made available to application developers on their platform, limit the use of personal information for advertising purposes or restrict how end users can share information on their platform or across other platforms.
+Added: Each may also change its fee structure, add fees associated with access to and use of its platform, alter how customers are able to advertise or monetize on their platform, change how the personal or other user information is made available to application developers on their platform, limit the use of personal information for advertising purposes or restrict how end users can share information on their platform or across other platforms.
In particular, operating system platform providers or application stores such as Apple or Google may change their technical requirements or policies in a manner that adversely impacts the way in which we or our customers offer solutions or collect, use, and share data from end-user devices.
−Removed: Restrictions on our ability to collect and use data as desired could negatively impact our Grow Solutions as well as our resource planning and feature development planning for our software.
−Removed: For example, Apple implemented a requirement for applications using its mobile operating system, iOS, to affirmatively obtain an end user’s permission to "track them across apps or websites owned by other companies" or access their device’s advertising identifier for advertising and advertising measurement purposes, as well as other restrictions.
−Removed: The long-term impact of these and other privacy, platform, and regulatory changes remains uncertain.
−Removed: In addition, these platforms could change their business models and could, for example, increase application store fees to our customers, which could have an adverse impact on our business.
−Removed: Unity Software Inc.
−Removed: If we or our customers were to violate, or an operating system platform provider or application store believes that we or our customers have violated, its terms of service or policies, that operating system platform provider or application store could limit or discontinue our or our customers’ access to its platform or store.
+Added: Restrictions on our ability to collect and use data as desired could negatively impact our Create Solutions and Grow Solutions as well as our resource planning and feature development planning for our software.
+Added: For example, Google is continuing to develop their implementation of Android Privacy Sandbox, a set of technologies that will, when their use is mandated, alter the manner in which advertising is performed on Android devices, and which may impact our business.
+Added: The long-term impact of these and other future privacy, platform, and regulatory changes could increase application store fees to our customers, or have other impacts which could harm our business.
+Added: If we or our customers violate or are accused of violating these terms of service or policies, an operating system platform provider or application store could limit or discontinue our or our customers' access to its platform or store.
They could also limit or discontinue our access to its platform or store if it establishes more favorable relationships with one or more of our competitors or it determines that it is in their business interests to do so.
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Market acceptance of our platform in industries beyond gaming may not grow as we expect and if our platform does not achieve widespread adoption in these other markets, our ability to grow our revenue may suffer.
+Added: Unity Software Inc.
In addition, the investments we make to grow our business by expanding into new industries will continue to increase our costs and operating expenses on an absolute basis.
−Removed: We expect to invest significant research and development resources to develop and expand our products' functionality to meet the needs of customers in these industries, and we will need to increase our sales and marketing, legal and compliance and other efforts as we seek to expand into new industries that require a different go-to-market strategy than the gaming industry.
+Added: We expect to invest significant research and development resources to develop and expand our solutions' functionality to meet the needs of customers in these industries, and we will need to increase our sales and marketing, legal and compliance and other efforts as we seek to expand into new industries that require a different go-to-market strategy than the gaming industry.
These investments will occur in advance of our realization of significant revenue from such industries, particularly given that customers in these industries are typically enterprise customers with long contracting cycles, which will make it difficult to determine if we are allocating our resources effectively and efficiently.
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If we are unable to source additional strategic relationships or the parties with whom we currently have strategic relationships were to terminate their relationship with us, our revenue could decline and our business could be adversely affected.
−Removed: Unity Software Inc.
We are dependent on the success of our customers in the gaming market.
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The gaming market is characterized by intense competition, rapid technological change, increased focus by regulators, and economic uncertainty and, as such, there is no guarantee that any of our customers' games will gain any meaningful traction with end users.
−Removed: In addition, some of our newer products, like Multiplay and Vivox, are more reliant on certain customers.
+Added: In addition, some of our offerings, like Multiplay and Vivox, are more reliant on certain customers.
While our large and diverse customer portfolio has helped to reduce the fluctuations in our Grow Solutions revenue as a whole resulting from the success of customers' games and the timing of game releases, we cannot assure you that the size and diversification of our customer portfolio will sufficiently mitigate this risk.
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Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control.
−Removed: As a result, our past results may not be indicative of our future performance.
+Added: As a result, our past results may not be
+Added: Unity Software Inc.
+Added: indicative of our future performance.
In addition to the other risks described herein, factors that may affect our results of operations include the following:
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• amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions, many of which occur in advance of the anticipated benefits resulting from such expenses;
−Removed: Unity Software Inc.
• amount and timing of non-cash expenses, including stock-based compensation, amortization of acquired intangibles and acquisition-related expenses;
• amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees;
−Removed: • timing of acquisitions and costs associated with integrating acquired companies, including the ironSource Merger;
−Removed: • general economic, social and public health conditions, both domestically and globally, including recently worsening macroeconomic conditions, as well as conditions specifically affecting industries in which our customers operate, which can impact customer spending and result in longer deal cycles;
+Added: • timing of acquisitions and costs associated with integrating acquired companies;
+Added: • general economic, social and public health conditions, both domestically and globally, including uncertain macroeconomic conditions, as well as conditions specifically affecting industries in which our customers operate, which can impact customer spending and result in longer deal cycles;
• incorrect estimates or judgments relating to our critical accounting policies;
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If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.
−Removed: Our core value of putting our users first may cause us to forgo short-term gains and may not lead to the long-term benefits we expect.
−Removed: One of our core values is that our users come first in everything we do, which we believe is essential to our success in increasing our growth and engagement and in serving the best, long-term interests of our company and our stockholders.
−Removed: Therefore, we may forgo certain expansion or short-term revenue or cost-saving opportunities that we do not believe will enhance the experience of our users, even if our decision negatively impacts our operating results.
−Removed: We cannot assure you that our decisions will lead to the long-term benefits that we expect, in which case our business and operating results could be harmed.
+Added: Unity Software Inc.
Third parties with whom we do business may be unable to honor their obligations to us or their actions may put us at risk.
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If we lose one or more business relationships, or experience a degradation of services, our business could be harmed and our financial results could be adversely affected.
−Removed: Unity Software Inc.
We use resellers and other third parties to sell, market, and deploy our solutions to a variety of customers, and our failure to effectively develop, manage, and maintain our indirect sales channels would harm our business.
−Removed: We use and plan to use resellers and other third parties to sell, market, and deploy our Create Solutions to a variety of customers, particularly in industries beyond gaming.
+Added: We use resellers and other third parties to sell, market, and deploy our Create Solutions to a variety of customers, particularly in industries beyond gaming.
For example, we currently leverage an indirect value-added reseller network to cost effectively service our mid-sized, small and independent Create Solutions customers and we engage in cooperative marketing efforts with strategic partners.
Loss of or reduction in sales through these third parties could reduce our revenue.
−Removed: Identifying and retaining resellers and strategic partners, training them in our technology and product offerings, and negotiating and documenting relationships with them, requires significant time and resources.
+Added: Identifying and retaining resellers and strategic partners, training them in our technology and solutions, and negotiating and documenting relationships with them, requires significant time and resources.
We cannot assure you that we will be able to maintain our relationships with our resellers or strategic partners on favorable terms or at all.
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Sales to larger customers involve risks that may not be present or that are present to a lesser extent with sales to smaller customers, such as longer sales cycles, more complex customer requirements, substantial upfront sales costs, and less predictability in completing some of our sales.
−Removed: If we do not effectively expand our direct sales capabilities to address these industries effectively or develop effective sales and marketing strategies for those industries, or if we focus our efforts on non-gaming industries that end up being slow adopters of our platform and solutions, our ability to increase sales of our platform and solutions to industries and for use cases outside gaming will be adversely affected.
+Added: If we do not effectively expand our direct sales capabilities to address these industries effectively or develop effective sales and marketing strategies for those industries, or if we focus our efforts on non-gaming
+Added: Unity Software Inc.
+Added: industries that end up being slow adopters of our platform and solutions, our ability to increase sales of our platform and solutions to industries and for use cases outside gaming will be adversely affected.
We provide service-level agreement commitments related to certain of our Create and Grow Solutions.
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Any service-level failures could also damage our reputation, which could also adversely affect our business, financial condition and results of operations.
−Removed: Unity Software Inc.
If we fail to offer high-quality support, our ability to retain and attract customers could suffer.
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Any such coverage may not continue to be available to us on acceptable terms or at all.
−Removed: Our business could be disrupted by catastrophic events, including health pandemics.
+Added: Our business could be disrupted by catastrophic events, including health pandemics, militarization, or war.
Any catastrophic event, including earthquake, fire, flood, tsunami or other weather event, power loss, telecommunications failure, software or hardware malfunction, cyber-attack, war or terrorist attack, explosion, or pandemic could impact our business.
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Our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster.
+Added: In addition, certain of our operations could be impacted by militarization or war, discussed below.
If any disaster were to occur, our ability to operate our business at our facilities could be impaired and we could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume operations.
−Removed: If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster and to execute successfully on those plans in the event of a disaster or emergency, our business would be harmed.
+Added: If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster and
+Added: Unity Software Inc.
+Added: to execute successfully on those plans in the event of a disaster or emergency, our business would be harmed.
+Added: Conditions in Israel, including political unrest, militarization and war, has impacted and may further adversely affect our operations.
+Added: Because many of the operations of Grow Solutions are conducted in Israel, many of our employees, including certain management members, are located in Israel.
+Added: Political unrest, militarization, or continued war in Israel or the surrounding region has not materially impacted our operations as a whole, but has impacted our employee productivity in Israel, and may further adversely affect our business.
+Added: Following attacks in Israel by Hamas, a U.S.
+Added: designated terrorist organization, Israel formally declared war.
+Added: In addition, there have also been rocket attacks by Hezbollah, also a U.S.
+Added: designated terrorist organization, in the north of the country.
+Added: Several hundred thousand Israeli military reservists have been drafted into immediate military service.
+Added: If a substantial number of our employees, key members of our management team, or employees of our service providers in Israel are conscripted into military service on a prolonged basis, our operations and result of operations, particularly of our Grow Solutions, may be harmed.
+Added: In the event that our facilities in Israel or facilities of providers of critical services to our operations in Israel are damaged, our ability to deliver or provide solutions and services in a timely manner to meet our contractual obligations with customers, partners and vendors and otherwise meet users' expectations, and our ability to develop our solutions in order to be competitive, could be adversely affected.
+Added: In addition, we may incur significant costs in order to resume operations and we may be unable to develop or implement adequate plans to ensure continuity of business functions.
+Added: Our commercial insurance may not cover losses that may occur as a result of events associated with war and terrorism.
+Added: The Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, but we cannot assure you that such government coverage will be maintained or that it will sufficiently cover our potential damages.
+Added: Any losses or damages incurred by us could harm our business.
+Added: In addition, some countries may impose restrictions on doing business with Israel or companies with operations in Israel.
+Added: There have also been calls to boycott Israeli goods and services.
+Added: Such efforts may impact the operations of Grow Solutions and harm our business.
+Added: The intensity and duration of Israel’s current war against Hamas and the hostilities on the northern border are difficult to predict, as are their impacts on Israel's economy in general and on our business and operations that are conducted in Israel.
Our current operations are and will continue to be global in scope, creating a variety of operational challenges.
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Our current and future global business and operations involve a variety of risks, including:
−Removed: • slower than anticipated availability and adoption of our platform by creators outside the U.S.;
−Removed: • changes or instability in local or regional political, social or economic conditions;
+Added: • slower than anticipated availability and adoption of our platform by creators outside the U.S., for example, in China where we experienced softness throughout 2023;
• the need to adapt and localize our platform for specific countries;
−Removed: Unity Software Inc.
−Removed: • maintaining our company culture, which emphasizes developing and launching new and innovative solutions and which we believe is essential to our business, across all of our offices globally;
+Added: • maintaining our company culture, which emphasizes developing and launching new and innovative solutions and which we believe is essential to our business, across all of our offices globally and requires aligning our values across cultures and viewpoints;
• difficulty collecting accounts receivable and potential for longer payment cycles;
• increased reliance on resellers and other third parties for our global expansion;
+Added: Unity Software Inc.
• burdens of complying with a variety of foreign laws, including costs associated with legal structures, accounting, statutory filings and tax liabilities;
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• reduced or uncertain intellectual property protection or difficulties obtaining, maintaining, protecting or enforcing our intellectual property rights, including foreign government interference with our intellectual property that resides outside of the U.S.;
−Removed: political instability, hostilities, war, or terrorist activities;
+Added: • political instability, societal unrest, hostilities, war, or terrorist activities, including in Israel or the surrounding region where a significant portion of our Grow Solutions team is located;
and subsequent retaliatory measures and sanctions;
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and are unable to do so successfully and in a timely manner, our business and results of operations will suffer.
−Removed: Unity Software Inc.
We are exposed to collection and credit risks, which could impact our operating results.
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Our Create Solutions typically include upfront purchase commitments for a one- to three-year subscription, which may be invoiced over multiple reporting periods, increasing these risks.
−Removed: For example, with respect to our Grow Solutions, we rely on payments from advertisers in order to pay our customers their revenue earned from our Unified Auction, LevelPlay and Sonic.
+Added: We rely on payments from advertisers in order to pay our Grow Solutions customers their revenue earned from Unity Ads, LevelPlay, and Sonic.
We are generally obligated to pay our customers for revenue earned within a negotiated period of time, regardless of whether or not our advertisers have paid us on time, or at all.
−Removed: While we attempt to negotiate a longer payment period with our customers and shorter periods for our advertisers, we are not always successful.
+Added: While we attempt to negotiate a longer payment period with our customers and shorter periods for our
+Added: Unity Software Inc.
+Added: advertisers, we are not always successful.
As a result, we can face a timing issue with our accounts payable on shorter cycles than our accounts receivable, requiring us to remit payments from our own funds, and accept the risk of bad debt.
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If we fail to adequately assess and monitor our credit risks, we could experience longer payment cycles, increased collection costs and higher bad debt expense, and our business, operating results and financial condition could be harmed.
+Added: Adverse developments affecting the financial services industry, such as actual events or perceived concerns involving liquidity, defaults or non-performance by financial institutions could adversely affect our financial condition and results of operations.
+Added: Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or the financial services industry generally, or concerns or rumors about any such events, have in the past and may in the future lead to market-wide liquidity problems.
+Added: Our access to funding sources in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, or customers, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general.
+Added: Any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by parties with whom we conduct business, which in turn, could have an adverse effect on our current and/or projected business operations and results of operations and financial condition.
+Added: For example, a party with whom we conduct business may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy.
+Added: Any bankruptcy or insolvency, or the failure to make payments when due, of any counterparty of ours, or the loss of any significant relationships, could result in losses to us and may adversely impact our business.
Fluctuations in currency exchange rates could harm our operating results and financial condition.
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As a result of the ironSource Merger, we have certain limited forward currency contracts in place to hedge foreign currency exposure, but we have not otherwise engaged in currency hedging activities to limit the risk of exchange fluctuations and, as a result, our financial condition and operating results have been and could continue to be adversely affected by such fluctuations.
−Removed: Unity Software Inc.
We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
−Removed: We have funded our operations since inception primarily with sales of our convertible preferred stock, common stock and convertible notes and with cash generated from sales of our Create Solutions and Grow Solutions and from our strategic partnerships.
We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business.
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Additional financing may not be available on terms favorable to us, if at all.
−Removed: Macroeconomic trends like inflation, rising interest rates, geopolitical tension and supply chain issues have caused and may continue to cause disruption in the global financial markets, which may reduce our ability to access capital and negatively affect our liquidity in the future.
−Removed: If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition.
+Added: Unity Software Inc.
+Added: funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition.
+Added: In addition, we may need to take other measures that would impact our liquidity.
+Added: For example, under certain conditions we may be required to repurchase the third-party interest in Unity China, which would impact our liquidity.
If we incur additional debt the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
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Additionally, when we announce or release new versions of our platform or advancements in our technology, we could fail to sufficiently explain or train our customers on how to use such new versions or advancements or we may announce or release such versions prematurely.
−Removed: These failures on our part may lead to our customers being confused about use of our products or expected technology releases, and our ability to grow our business, results of operations, brand and reputation may be adversely affected.
+Added: These failures on our part may lead to our customers being confused about use of our offerings or expected technology releases, and our ability to grow our business, results of operations, brand and reputation may be adversely affected.
For example, such failures have in the past led to customers expressing frustration with our platform on social media and other internet sites.
−Removed: Unity Software Inc.
Interruptions, performance problems, or defects associated with our platform may adversely affect our business, financial condition, and results of operations.
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We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of customers accessing our platform simultaneously, denial of service attacks or other security-related incidents.
+Added: Unity Software Inc.
It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our customer base grows and our platform becomes more complex.
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In addition, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition and results of operations, as well as our reputation, may be adversely affected.
−Removed: For example, due to heightened concerns about the regulatory environment with respect to privacy and security matters, our customers are increasingly requesting audit certifications, such as SOC 2, Type II, that we have not yet achieved with respect to some of our products.
+Added: For example, due to heightened concerns about the regulatory environment with respect to privacy and security matters, our customers are increasingly requesting audit certifications, such as SOC 2, Type II, that we have not yet achieved with respect to some of our offerings.
Failure to achieve these certifications may adversely impact our ability to grow our business at the pace that may be expected by our investors.
Additionally, material interruptions to our service due to security-related incidents may expose us to regulatory fines in certain jurisdictions where we operate even in the absence of data loss.
−Removed: Further, the software technology underlying our platform is inherently complex and may contain material defects or errors, particularly when new products are first introduced or when new features or capabilities are released.
−Removed: We have from time to time found defects or errors in our platform, and new defects or errors in our existing platform or new products may be detected in the future by us or our users.
−Removed: For example, our revenue growth in the first half of 2022 was negatively impacted by challenges with our Grow Solutions products (including a fault in our platform that resulted in reduced accuracy of one of our monetization tools, as well as the consequences of ingesting bad data from a large customer) that reduced the efficacy of such products.
−Removed: We cannot assure you that our existing platform and new products will not contain defects.
+Added: Further, the software technology underlying our platform is inherently complex and may contain material defects or errors, particularly when new solutions are first introduced or when new features or capabilities are released.
+Added: We have from time to time found defects or errors in our platform, and new defects or errors in our existing platform or new solutions may be detected in the future by us or our users.
+Added: For example, our revenue growth in the first half of 2022 was negatively impacted by challenges with certain of our Grow Solutions (including a fault in our platform that resulted in reduced accuracy of one of our monetization tools, as well as the consequences of ingesting bad data from a large customer) that reduced the efficacy of such products.
+Added: We cannot assure you that our existing platform and new offerings will not contain defects.
Any real or perceived errors, failures, vulnerabilities, or bugs in our platform could result in negative publicity or lead to data security, access, retention or other performance issues, all of which could harm our business.
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Moreover, the harm to our reputation and legal liability related to such defects or errors may be substantial and could similarly harm our business.
−Removed: If we or our third-party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers’ data, our data, or our platform, our platform may be perceived as not secure, our reputation may be harmed, our business operations may be disrupted, demand for our products may be reduced, and we may incur significant liabilities.
−Removed: Operating our business and platform involves the collection, storage and transmission of sensitive, proprietary and confidential information, including personal information of our personnel, customers and their end users, our proprietary and confidential information and the confidential information we collect from our partners, customers and creators.
+Added: We are increasingly building AI into certain of our offerings, and issues raised by the use of AI in our offerings may adversely affect our business, reputation, or financial results.
+Added: We are increasingly building AI into certain of our offerings, such as Unity Muse, an expansive platform for AI-driven assistance during creation, and Unity Sentis, which allows creators to embed an AI model in the Unity Runtime for their game or application, enhancing gameplay and other functionality.
+Added: We continue to advance machine learning algorithms in our Grow Solutions, which are designed to enable us to provide customers with better performance.
+Added: AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving regulatory landscape.
+Added: The evolving regulatory landscape and our product development efforts may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results.
+Added: For example, the use of datasets to develop and be referenced by AI models, the content generated by AI systems, or the application of AI systems may be found to be insufficient, offensive, biased, or harmful, or violate current or future laws and regulations or third-party rights.
+Added: In addition, AI and machine learning ("ML") models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct.
+Added: If our technology is used by an end user in a controversial manner due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm or legal liability.
+Added: In addition, market acceptance of AI technologies is uncertain, and we may be unsuccessful in product development efforts.
+Added: Our solutions that use AI could fail to achieve market acceptance, or our competitors may use AI technologies more efficiently than we do.
+Added: We may incur significant costs and may
Unity Software Inc.
+Added: not achieve any significant revenue from these offerings.
+Added: Any of these factors could adversely affect our business, reputation, or financial results.
+Added: If we or our third-party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers' data, our data, or our platform, our platform may be perceived as not secure, our reputation may be harmed, our business operations may be disrupted, demand for our solutions may be reduced, and we may incur significant liabilities.
+Added: Operating our business and platform involves the collection, storage and transmission of sensitive, proprietary and confidential information, including personal information of our personnel, customers and their end users, our proprietary and confidential information and the confidential information we collect from our partners, customers and creators.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.
−Removed: Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer "hackers," threat actors, "hacktivists"” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
−Removed: We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to, computer malware (including as a result of advanced persistent threat intrusions), software bugs and vulnerabilities, malicious code, viruses and worms, social engineering (including spear phishing and ransomware attacks), denial-of-service attacks (such as credential stuffing attacks), credential harvesting, personnel misconduct or error, supply chain attacks server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, and other similar threats.
−Removed: Such incidents have become more prevalent in our industry in recent years.
+Added: Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer "hackers," threat actors, "hacktivists" organized criminal threat actors, personnel (such as through theft, misuse, or accident), sophisticated nation states, and nation-state-supported actors.
+Added: For example, the increased hostilities and militarization in and around Israel, where a significant part of our Grow Solutions operations is based, may lead to an increase in politically motivated cyber-attacks which could impact our operations and harm our business.
+Added: We and the third parties upon which we rely are subject to a variety of constantly evolving threats, including but not limited to, computer malware (including as a result of advanced persistent threat intrusions), software bugs and vulnerabilities, malicious code, viruses and worms, social engineering (including spear phishing and ransomware attacks), denial-of-service attacks (such as credential stuffing attacks), credential harvesting, personnel misconduct or error, supply chain attacks server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, and other similar threats.
+Added: Such incidents have become more prevalent in our industry in recent years and the emergence of new AI technologies presents risks of further vulnerabilities.
For example, attempts by malicious actors to fraudulently induce our personnel into disclosing usernames, passwords or other information that can be used to access our systems have increased and could be successful.
−Removed: Ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, loss of data, loss of income, significant extra expenses to restore data or systems, reputational harm, and the diversion of funds.
+Added: Ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, loss of data, loss of income, significant extra expenses and resources to restore data or systems, reputational harm, and the diversion of funds.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting payments.
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Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
+Added: Additionally, our or our customers' sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with our employees', personnel's, or vendors' use of generative AI technologies.
+Added: Any such information that we input into a third-party generative AI or ML platform could be revealed to others, including if information is used to train the third party's AI/ML models.
+Added: Additionally, where an AI/ML model ingests personal information and makes connections using such data, those technologies may reveal other sensitive, proprietary, or confidential information generated by the model.
+Added: Moreover, AI/ML models may create incomplete, inaccurate, or otherwise flawed outputs, some of which may appear correct.
+Added: We may use AI/ML outputs to make certain decisions.
+Added: Due to these potential flaws, the model could lead us to make decisions that could bias certain individuals or
+Added: Unity Software Inc.
+Added: classes of individuals and adversely impact their rights.
+Added: As a result, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liability.
Such incidents have occurred in the past, and may occur in the future, resulting in unauthorized, unlawful or inappropriate access to, inability to access, disclosure of or loss of the sensitive, proprietary and confidential information that we handle.
For example, like many companies, we use Log4j with respect to certain software or systems to log security and performance information.
−Removed: A vulnerability in Log4j was discovered in late 2021 and widely exploited by threat actors, and, upon learning of this vulnerability, we made updates to our products and infrastructure intended to reduce risks associated with the vulnerability.
+Added: A vulnerability in Log4j was discovered in late 2021 and widely exploited by threat actors, and, upon learning of this vulnerability, we made updates to our offerings and infrastructure intended to reduce risks associated with the vulnerability.
Investigations into potential incidents occur on a regular basis as part of our security program.
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We rely on third parties to provide critical services that help us deliver our solutions and operate our business.
−Removed: In the course of providing their services, these third parties may support or operate critical business systems for us or store or process personal information and any of the same sensitive, proprietary and confidential information that we handle.
+Added: In the course of providing their services, these third parties may support or operate critical business systems for us or store or process personal, sensitive, proprietary and/or confidential information on our behalf.
These third-party providers may not have adequate security measures and have experienced and could experience in the future security incidents that compromise the confidentiality, integrity or availability of the systems they operate for us or the information they process on our behalf.
Such occurrences could adversely affect our business to the same degree as if we had experienced these occurrences directly and we may not have recourse to the responsible third parties for the resulting liability we incur.
−Removed: Unity Software Inc.
−Removed: Because there are many different cybercrime and hacking techniques and such techniques continue to evolve, we may be unable to anticipate attempted security breaches, react in a timely manner or implement adequate preventative measures.
−Removed: While we have developed systems and processes designed to protect the integrity, confidentiality and security of our and our customers’ confidential and personal information under our control, we cannot assure you that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats.
+Added: Because there are many different cybercrime and hacking techniques and such techniques continue to evolve, we may be unable to anticipate attempted security breaches, react in a timely or effective manner or implement adequate preventative measures.
+Added: While we have developed systems and processes designed to protect the integrity, confidentiality and security of our and our customers' confidential, proprietary, and personal information under our control, we cannot assure you that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats.
A security breach or other security incident, or the perception that one has occurred, could result in a loss of customer confidence in the security of our platform and damage to our reputation and brand, reduce demand for our solutions, disrupt normal business operations, require us to incur material costs to investigate and remedy the incident and prevent recurrence, expose us to litigation, regulatory enforcement action, fines, penalties and damages and adversely affect our business, financial condition and results of operations.
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Additionally, we cannot be certain that our insurance coverage will be adequate for data security liabilities actually incurred, will cover any indemnification claims against us relating to any incident, will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
−Removed: The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations.
+Added: The successful assertion of one or more large claims against us that
+Added: Unity Software Inc.
+Added: exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations.
In addition, we continue to expend significant costs to seek to protect our platform and solutions and to introduce additional security features for our customers, and we expect to continue to have to expend significant costs in the future.
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The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis.
−Removed: Accordingly, our ability to increase our revenue depends in large part on our ability to maintain, improve and differentiate our existing platform and introduce new functionality.
−Removed: Unity Software Inc.
+Added: For example, Apple has announced that it is working with us to further develop its Vision Pro offerings.
+Added: If Apple's Vision Pro fails to gain market acceptance, or if our offerings used to advance Vision Pro fail to perform properly, our business could be harmed.
+Added: Similarly, emerging technologies like artificial intelligence could impact the way that customers utilize our solutions as well as enhance the functionality of our solutions.
+Added: Accordingly, our ability to increase our revenue depends in large part on our ability to maintain, improve and differentiate our existing platform and introduce new functionality promptly and effectively.
We must continue to improve existing features and add new features and functionality to our platform in order to retain our existing customers and attract new ones.
For example, if the technology underlying our high-definition rendering pipeline or our graphics, animation and audio tools become obsolete or do not address the needs of our customers, our business would suffer.
−Removed: Revenue growth from our products depends on our ability to continue to develop and offer effective features and functionality for our customers and to respond to frequently changing privacy and data security laws and regulations, policies, and end-user demands and expectations, which will require us to incur additional costs to implement.
−Removed: If we do not continue to improve our platform with additional features and functionality in a timely fashion, or if improvements to our platform are not well received by customers, our revenue could be adversely affected.
−Removed: If we fail to deliver timely releases of our products that are ready for commercial use, release a new version, service, tool or update with material errors, or are unable to enhance our platform to keep pace with rapid technological and regulatory changes or respond to new offerings by our competitors, or if new technologies emerge that are able to deliver competitive solutions at lower prices, more efficiently, more conveniently or more securely than our solutions, or if new operating systems, gaming platforms or devices are developed and we are unable to support our customers' deployment of games and other applications onto those systems, platforms or devices, our business, financial condition and results of operations could be adversely affected.
+Added: Revenue growth from our offerings depends on our ability to continue to develop and offer effective features and functionality for our customers and to respond to frequently changing privacy and data security laws and regulations, policies, and end-user demands and expectations, which will require us to incur additional costs to implement.
+Added: If we do not continue to improve our platform with additional features and functionality in a timely fashion, or if intended improvements to our platform are ineffective or otherwise not well received by customers, our revenue could be adversely affected.
+Added: If we fail to deliver timely releases of our solutions that are ready for commercial use, release a new version, service, tool or update with material errors, or are unable to enhance our platform to keep pace with rapid technological and regulatory changes or respond to new offerings by our competitors, or if new technologies emerge that are able to deliver competitive solutions at lower prices, more efficiently, more conveniently or more securely than our solutions, or if new operating systems, gaming platforms or devices are developed and we are unable to support our customers' deployment of games and other applications onto those systems, platforms or devices, our business, financial condition and results of operations could be adversely affected.
Our business depends on the interoperability of our solutions across third-party platforms, operating systems, and applications, and on our ability to ensure our platform and solutions operate effectively on those platforms.
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Third-party platforms are constantly evolving, and we may not be able to modify our solutions to assure compatibility with that of other third parties following development changes within a timely manner.
−Removed: For example, third-party platforms frequently deploy updates to their hardware or software and modify their system requirements.
+Added: For example, third-
+Added: Unity Software Inc.
+Added: party platforms frequently deploy updates to their hardware or software and modify their system requirements.
The success of our business depends on our ability to incorporate these updates to third-party licensed software into our technology, effectively respond to changes to device and operating system platform requirements, and maintain our relationships with third-party platforms.
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If we fail to effectively respond to changes or updates to third-party platforms that we support, our business, financial condition, and results of operations could be harmed.
−Removed: Unity Software Inc.
We rely upon third-party data centers and providers of cloud-based infrastructure to host our platform.
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In addition, our Grow Solutions and enterprise game server hosting depend on the ability of these data centers and cloud infrastructure to allow for our customers' configuration, architecture, features and interconnection specifications and to secure the information stored in these data centers.
−Removed: Any limitation on the capacity of our data centers or cloud infrastructure could impede our ability to onboard new customers or expand the usage of our existing customers, host our products or serve our customers, which could adversely affect our business, financial condition and results of operations.
+Added: Any limitation on the capacity of our data centers or cloud infrastructure could impede our ability to onboard new customers or expand the usage of our existing customers, host our solutions or serve our customers, which could adversely affect our business, financial condition and results of operations.
In addition, any incident affecting our data centers or cloud infrastructure that may be caused by cyber-attacks, natural disasters, fire, flood, severe storm, earthquake, power loss, outbreaks of contagious diseases, telecommunications failures, terrorist or other attacks and other similar events beyond our control could negatively affect the cloud-based portion of our platform.
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In the event that our service agreements relating to our data centers or cloud infrastructure are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform, loss of revenue from revenue-share and consumption-based solutions, as well as significant delays and additional expense in arranging or creating new facilities and services or re-architecting our platform for deployment on a different data center provider or cloud infrastructure service provider, which could adversely affect our business, financial condition and results of operations.
−Removed: Unity Software Inc.
Any failure to obtain, maintain, protect or enforce our intellectual property and proprietary rights could impair our ability to protect our proprietary technology and our brand.
3 unchanged sentences
If we fail to protect our intellectual property rights adequately, or fail to continuously innovate and advance our technology, our competitors could gain access to our proprietary technology and develop and commercialize substantially identical products, services or technologies.
−Removed: In addition, defending our intellectual property rights might entail significant expense.
+Added: In addition, defending our intellectual property rights might entail significant
+Added: Unity Software Inc.
Any patents, trademarks or other intellectual property rights that we have or may obtain may be challenged or circumvented by others or invalidated or held unenforceable through administrative processes.
3 unchanged sentences
Despite our precautions, it may be possible for unauthorized third parties to copy our solutions and use information that we regard as proprietary to create products that compete with ours.
−Removed: Patent, trademark, copyright and trade secret protection may not be available to us in every country in which our products are available.
+Added: Patent, trademark, copyright and trade secret protection may not be available to us in every country in which our solutions are available.
The value of our intellectual property could diminish if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks.
1 unchanged sentence
In some cases, litigation or other actions may be necessary to protect or enforce our trademarks and other intellectual property rights.
−Removed: Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly license agreements, required to rebrand our products or prevented from selling some of our products if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks or other intellectual property rights.
+Added: Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly license agreements, required to rebrand our solutions or prevented from selling some of our solutions if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks or other intellectual property rights.
In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate.
8 unchanged sentences
These agreements may be breached, and we may not have adequate remedies for any such breach.
−Removed: Unity Software Inc.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights.
2 unchanged sentences
Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights, and if such defenses, counterclaims or countersuits are successful, we could lose valuable intellectual property rights.
−Removed: Our inability to enforce our unique licensing structure, including financial eligibility tiers, and our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our solutions, impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our products, or injure our reputation.
−Removed: We license and make available source code to customers.
−Removed: Although those customers are restricted in the manner in which they can use and share our source code, we cannot assure you that unauthorized use or copying of our source code will not occur.
−Removed: We rely on periodic significant updates to our source code to encourage our customers to access our source code through us on a paying or, for qualified users, non-paying, basis.
−Removed: However, we cannot assure you that this strategy will be effective in ensuring that users are not misusing or accessing our source code on an authorized basis.
+Added: Our inability to enforce our unique licensing structure, including financial eligibility tiers, and our inability to protect our proprietary technology against unauthorized copying or use, including circumvention of licensing or usage restrictions as well as any costly litigation or diversion of our management's attention and resources, could delay further sales or the implementation of our solutions, impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation.
+Added: Unity Software Inc.
+Added: We license and make available software to customers.
+Added: Although those customers are restricted in the manner in which they can use and share our software, we cannot assure you that unauthorized use or copying of our software will not occur.
+Added: We rely on periodic significant updates to our software to encourage our customers to access our software through us on a paying or, for qualified users, non-paying, basis.
+Added: However, we cannot assure you that this strategy will be effective in ensuring that users are not circumventing licensing or usage restrictions or otherwise misusing or accessing our software on an unauthorized basis.
Our ability to acquire and maintain licenses to intellectual property may affect our revenue and profitability.
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These licenses may become more expensive and increase the advances, guarantees and royalties that we may pay to the licensor, which could significantly increase our costs and adversely affect our profitability.
−Removed: Unity Software Inc.
We have been and may in the future become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.
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Our technologies may not be able to withstand any third-party claims against their use.
−Removed: In addition, many companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them.
+Added: In addition, many companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend against claims that may be brought against them.
Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue, and therefore, our patents and patent applications may provide little or no deterrence as we would not be able to assert them against such entities or individuals.
−Removed: If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology for any infringing aspect of our business, we would be forced to limit or stop sales of our solutions or cease business activities related to such intellectual property.
+Added: If a third party is able to obtain an injunction as a remedy for infringement of third-party intellectual property rights and if we cannot license or develop alternative technology, we may be forced to limit or stop sales of our solutions or cease business activities related to such intellectual property.
In addition, we may need to settle litigation and disputes on terms that are unfavorable to us.
2 unchanged sentences
Any intellectual property claim asserted against us, or for which we are required to provide indemnification, may require us to do one or more of the following:
−Removed: • cease selling or using products that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate;
+Added: • cease selling or using solutions that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate;
• make substantial payments for legal fees, settlement payments or other costs or damages;
• obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology;
−Removed: • redesign or rebrand the allegedly infringing products to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible.
+Added: • redesign or rebrand the allegedly infringing solutions to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible.
+Added: Unity Software Inc.
Even if the claims do not result in litigation or are resolved in our favor, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
−Removed: We expect that the occurrence of infringement claims is likely to grow as the market for our solutions grow.
+Added: We expect that the occurrence of infringement claims is likely to grow as the market for our solutions grows.
Accordingly, our exposure to damages resulting from infringement claims could increase, and this could further exhaust our financial and management resources.
−Removed: Unity Software Inc.
−Removed: We use open source software in our products, which could negatively affect our ability to sell our services or subject us to litigation or other actions.
−Removed: We use open source software in our products, and we expect to continue to incorporate open source software in our services in the future.
+Added: We use open source software in our solutions, which could negatively affect our ability to sell our services or subject us to litigation or other actions.
+Added: We use open source software in our solutions, and we expect to continue to incorporate open source software in our solutions in the future.
Few of the licenses applicable to open source software have been interpreted by courts, and these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products.
−Removed: Moreover, we cannot ensure you that we have not incorporated additional open source software in our software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures.
+Added: Moreover, we cannot ensure that we have not incorporated open source software in our software in a manner that is inconsistent with the terms of the applicable license.
Depending on the terms of certain of these licenses, we may be subject to certain requirements, including that we make source code available for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses.
−Removed: If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our products that contained the open source software and required to comply with onerous conditions or restrictions on these products, which could disrupt the distribution and sale of these products.
+Added: If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contained the open source software and required to comply with onerous conditions or restrictions on these solutions, which could disrupt the distribution and sale of these solutions.
From time to time, there have been claims challenging the ownership rights in open source software against companies that incorporate it into their products, and the licensors of such open source software provide no warranties or indemnities with respect to such claims.
As a result, we and our customers could be subject to lawsuits by parties claiming ownership of what we believe to be open source software.
−Removed: Litigation could be costly for us to defend, or require us to devote additional research and development resources to change our products, either of which could harm our business.
−Removed: In addition, although we employ open source software license screening measures, if we were to combine our proprietary software products with certain open source software in a particular manner we could, under certain open source licenses, be required to release the source code of our proprietary software products.
−Removed: Some open source projects have known vulnerabilities and architectural instabilities and are provided on an "as-is" basis which, if not properly addressed, could negatively affect the performance of our product.
−Removed: If we inappropriately use or incorporate open source software subject to certain types of open source licenses that challenge the proprietary nature of our products, we may be required to re-engineer such products, discontinue the sale of such products or take other remedial actions.
−Removed: Risks Related to Our Management, and Brand
+Added: Litigation could be costly for us to defend, or require us to devote additional research and development resources to change our solutions, either of which could harm our business.
+Added: In addition, although we employ open source software license screening measures, if we were to combine our proprietary software solutions with certain open source software in a particular manner we could, under certain open source licenses, be required to release the source code of our proprietary software solutions.
+Added: Some open source projects have known vulnerabilities and architectural instabilities and are provided on an "as-is" basis which, if not properly addressed, could negatively affect the performance of our solution.
+Added: If we inappropriately use or incorporate open source software subject to certain types of open source licenses that challenge the proprietary nature of our solutions, we may be required to re-engineer such solutions, discontinue the sale of such solutions or take other remedial actions.
+Added: Risks Related to Our Management, Talent, and Brand
Attracting, managing, and retaining our talent is critical to our success.
Our success and future growth depend upon the continued services of our management team and other key employees.
−Removed: In particular, our President and Chief Executive Officer, John Riccitiello, is critical to our overall management, as well as the continued development of our platform, our culture and our strategic direction.
−Removed: Changes in our management team, including changes due to the ironSource Merger, could disrupt our business.
+Added: Changes in our management team could disrupt our business.
We also are dependent on the continued service of our existing software engineers because of the complexity of our solutions.
−Removed: The loss of one or more members of our senior management, especially Mr.
−Removed: Riccitiello, or key employees could harm our business, and we may not be able to find adequate replacements.
−Removed: We cannot ensure that we will be able to retain the services of any members of our senior management or key employees.
−Removed: For example, certain of our senior management members are subject to share holding thresholds under an Israeli tax ruling we obtained in connection with the ironSource Merger.
−Removed: Their noncompliance with such tax ruling may result in adverse tax consequences to them which could harm their morale and that of their teams, and ultimately harm our business.
+Added: The loss of one or more members of our senior management or key employees could harm our business, and we may not be able to find adequate replacements.
+Added: For example, in October 2023 John Riccitiello retired from his prior role as our President and Chief Executive Officer and resigned from our board of directors.
+Added: Our board of directors appointed James Whitehurst as Interim Chief Executive Officer and a member of our board of directors.
+Added: Our board of directors is currently engaged in a search process for a permanent Chief Executive Officer and any inability to successfully transition the Chief Executive Officer role and/or attract a permanent successor for such role could adversely impact our business.
+Added: Additionally, we cannot ensure that we will be able to retain the services of any members of our senior management or key employees.
Unity Software Inc.
In addition, we must attract and retain highly qualified personnel.
−Removed: We have had difficulty quickly filling certain open positions in the past, and we expect to have significant future hiring needs.
−Removed: Competition is intense, particularly in the San Francisco Bay Area, Tel Aviv, and other areas in which we have offices, for engineers experienced in designing and developing cloud-based platform products, data scientists with experience in machine learning and artificial intelligence and experienced sales professionals.
−Removed: In order to continue to access top talent, we will likely continue to grow our footprint of office locations, which may add to the complexity and costs of our business operations.
−Removed: In addition, the recent move by companies to offer a remote of hybrid work environment may increase the competition for such employees from competitors outside of our traditional office locations.
−Removed: Many of the companies with which we compete for experienced personnel have greater resources than we have.
−Removed: If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources.
+Added: We have had difficulty quickly filling certain open positions in the past, and despite recently reevaluating our headcount needs, slowing down our hiring efforts, and reducing our headcount, we expect to have significant future hiring needs.
+Added: Competition is intense, particularly in the San Francisco Bay Area, Tel Aviv, and other areas in which we have offices, for engineers experienced in designing and developing cloud-based platform solutions, data scientists with experience in machine learning and artificial intelligence and experienced sales professionals.
+Added: As a global workforce, we must align our company values across employees from different cultures and value systems.
+Added: Failure to successfully create a cohesive company culture could harm our ability to attract and retain talent.
In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment.
−Removed: If the perceived value of our equity awards declines, it may not be as effective an incentive for attracting, retaining, and motivating employees.
+Added: If the perceived or actual value of our equity awards declines, it may not be as effective an incentive for attracting, retaining, and motivating employees.
New hires require training and take time before they achieve full productivity.
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Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing efforts, our ability to offer a reliable platform that continues to meet the needs and preferences of our customers at competitive prices, our ability to maintain our customers' trust, our ability to continue to develop new functionality to address a wide variety of use cases and our ability to successfully differentiate our platform from competitors.
+Added: We have in the past and may in the future experience public scrutiny of our business decisions and announcements.
+Added: For example, in the third quarter of 2023 we announced changes to our pricing model, which caused public scrutiny of our decision making, announcement and terms of service, all of which harmed our brand reputation and negatively impacted our business.
+Added: Our ability to manage potential social and ethical issues arising out of emerging technologies including artificial intelligence could impact our brand and customer adoption of our solutions.
Our brand promotion activities may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand.
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Risks Related to Laws, Regulations, and the Global Economy
−Removed: We are subject to rapidly changing and increasingly stringent laws, regulations, contractual obligations, and industry standards relating to privacy, data security, and the protection of children.
+Added: We are subject to rapidly changing and increasingly stringent laws, regulations, and industry standards relating to privacy, data security, and the protection of children.
The restrictions and costs imposed by these requirements, or our actual or perceived failure to comply with them, could harm our business.
−Removed: Our products, and particularly our Grow Solutions, rely on our ability to process sensitive, proprietary, confidential, and regulated information, including personal information, that belongs to us or that we handle on behalf of others such as our customers.
−Removed: These activities are regulated by a variety of federal, state, local, and foreign privacy and data security laws and regulations, which have become increasingly stringent in recent years and continue to evolve.
−Removed: Any actual or perceived non-compliance could result in litigation and proceedings against us, fines and civil or criminal penalties, obligations to cease offerings or to substantially modify our Grow Solutions in ways that make them less effective in certain jurisdictions, negative publicity, and reduced overall demand for our platform or reduced returns on our Grow Solutions.
+Added: Our offerings, and particularly our Grow Solutions, rely on our ability to process sensitive, proprietary, confidential, and regulated information, including personal information, that belongs to us or that we handle on behalf of others such as our customers.
+Added: These activities are regulated by an increasing number of various federal, state, local, and foreign privacy and data security laws and regulations.
+Added: These have become increasingly stringent and continue to evolve, requiring significant resources for compliance.
+Added: Any actual or perceived non-compliance could result in litigation, regulatory proceedings, fines and civil or criminal penalties, obligations to cease offerings or to substantially modify our Grow Solutions in ways that make them less effective in certain jurisdictions, negative publicity, and reduced overall demand for our platform or reduced returns on our Grow Solutions.
Unity Software Inc.
−Removed: Internationally, most jurisdictions in which we or our customers operate have adopted privacy and data security laws.
−Removed: For example, European privacy and data security laws, including the European Union's General Data Protection Regulation ("EU GDPR”), the United Kingdom’s GDPR (“UK GDPR") and others, impose significant and complex burdens on processing personal information and provide for robust regulatory enforcement and significant penalties for noncompliance.
−Removed: For example, under the EU GDPR, companies can face litigation, bans on data processing, fines of up to the greater of 20 million Euros or 4% of worldwide annual revenue, and private litigation related to processing of personal information brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
+Added: Most jurisdictions in which we or our customers operate have adopted privacy and data security laws.
+Added: For example, European privacy and data security laws, including the European Union's General Data Protection Regulation ("EU GDPR"), the European Union's Digital Services Act, the United Kingdom's GDPR ("UK GDPR") and others, impose significant and complex burdens on processing personal information and provide for robust regulatory enforcement and significant penalties for noncompliance.
Regulators, courts, and platforms have increasingly interpreted the GDPR and other privacy and data security laws as requiring affirmative opt-in consent to use cookies and similar technologies for personalization, advertising, and analytics.
−Removed: Proposed regulations could also impose onerous obligations related to artificial intelligence ("AI"), the use of cookies and other online tracking technologies on which our products rely, and online direct marketing.
+Added: Proposed regulations could also impose onerous obligations related to AI, the use of cookies and other online tracking technologies on which our offerings rely, and online direct marketing.
Any of these could increase our exposure to regulatory enforcement actions, increase our compliance costs, and adversely affect our business.
−Removed: Globally, certain jurisdictions have enacted laws that may require data localization and have imposed requirements for cross-border transfers of personal information.
−Removed: For example, the cross-border transfer landscape in Europe remains unstable despite an agreement in principle between the U.S.
+Added: In addition, certain jurisdictions have enacted laws that may require data localization and have imposed requirements for cross-border transfers of personal information.
+Added: For example, the cross-border transfer landscape in Europe remains unstable despite an agreement between the U.S.
and Europe, and other countries outside of Europe have enacted or are considering enacting cross border data transfer restrictions and laws requiring data residency.
−Removed: The EU GDPR, UK GDPR, and other European privacy and data security laws generally prohibit the transfer of personal information to countries outside the European Economic Area ("EEA"), such as the U.S, that are not considered by the European Commission to provide an adequate level of data protection.
−Removed: Although there are currently various mechanisms that may be used to transfer personal information from the EEA and the United Kingdom to the U.S.
−Removed: in compliance with law, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these mechanisms.
−Removed: The future of cross-border data transfers remains uncertain in light of the evolving regulatory landscape both within and outside of Europe, which could increase the cost and complexity of doing business.
−Removed: If we cannot implement a valid mechanism for cross-border personal information transfers, we may face increased exposure to regulatory actions, penalties, and data processing restrictions or bans, and reduce demand for our services.
+Added: The EU GDPR, UK GDPR, and other European privacy and data security laws generally prohibit the transfer of personal information to countries outside the European Economic Area ("EEA"), such as the U.S, that are not considered by some authorities as generally providing an adequate level of data protection.
+Added: The various mechanisms that may be used for compliance with these data localization and other requirements are subject to legal challenges, and the future of cross-border data transfers remains uncertain in light of the evolving regulatory landscape, which could increase the cost and complexity of doing business.
+Added: If we cannot maintain a valid mechanism for cross-border personal information transfers, we may face increased exposure to regulatory actions, litigation, penalties, data processing restrictions or bans, and reduced demand for our services.
Loss of our ability to import personal information from Europe and elsewhere may also require us to increase our data processing capabilities outside the U.S.
at significant expense.
−Removed: Similarly, China's Personal Information Protection Law and Data Security Law, Canada's Personal Information Protection and Electronic Documents Act, related provincial laws, and Canada's Anti-Spam Legislation, Israel's Privacy Protection Law 5741-1981, and new and emerging privacy and data security regimes in other jurisdictions in which we operate, such as Japan's Act on the Protection of Personal Information, Singapore's Personal Data Protection Act, and South Korea's Personal Information Protection Act, broadly regulate processing of personal information and impose comprehensive compliance obligations and penalties.
−Removed: Unity Software Inc.
+Added: Similarly, China's Personal Information Protection Law and Data Security Law, Canada's Personal Information Protection and Electronic Documents Act, related provincial laws, and Canada's Anti-Spam Legislation, Israel's Privacy Protection Law 5741-1981, and new and emerging privacy and data security regimes in other jurisdictions in which we operate, such as China, Canada and Israel, broadly regulate processing of personal information and impose comprehensive compliance obligations and penalties.
In the U.S., federal, state, and local governments have enacted numerous privacy and data security laws, including data breach notification laws, personal information privacy laws, health information privacy laws, and consumer protection laws.
−Removed: For example, the TCPA imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax or text message.
+Added: For example, the Telephone Consumer Protection Act ("TCPA") imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax or text message.
TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the Federal Communications Commission or fines of up to $1,500 per violation imposed through private litigation or by state authorities.
−Removed: In addition, the California Consumer Privacy Act ("CCPA"), which applies to personal information of consumers, business representatives, and employees, imposes several obligations on covered businesses, including requirements to, among other things, respond to requests from California residents related to their personal information.
+Added: Some states have enacted laws similar to the TCPA, with similar potential exposure.
+Added: In addition, the California Consumer Privacy Act ("CCPA"), which applies to personal information of consumers, business representatives, employees, and other individuals with whom we interact, imposes a number of obligations on covered businesses, including requirements to respond to requests from California residents related to their personal information.
The CCPA contains significant potential penalties for noncompliance (up to $7,500 per violation).
−Removed: Additionally, the California Privacy Rights Act expands the CCPA’s requirements, including by adding new rights and establishing a new regulatory agency to implement and enforce the law.
−Removed: Other states are considering or have also enacted privacy and data security laws.
−Removed: For example, Virginia.
−Removed: Utah, Colorado, and Connecticut have similarly enacted comprehensive privacy and data security laws.
−Removed: Our actual or perceived noncompliance with these and other emerging state laws such laws could harm our business.
−Removed: There is also increasing focus at the state and federal level on use of sensitive categories of data that we may be deemed to collect from time to time.
−Removed: For example, several states and localities have enacted statutes banning or restricting the collection of biometric information and have enacted measures related to the use of AI and machine learning in products and services.
−Removed: In addition, some of our products employ technology to help creators build augmented and virtual reality applications, and their use to recognize and collect information about individuals could be perceived as subject to the emerging regulations relating to biometric privacy laws.
−Removed: Although we aim to comply with these emerging laws, our actual or perceived noncompliance may expose us to litigation risks.
−Removed: There are emerging cases applying existing privacy and data security laws in the U.S., such as the federal and state wiretapping laws in novel and potentially impactful ways that may affect our ability to offer certain products.
−Removed: The outcome of these cases could cause us to make changes to our products to avoid costly litigation, government enforcement actions, damages, and penalties under these laws, which could adversely affect our business, results of operations, and our financial condition.
+Added: Additionally, the California Privacy Rights Act expanded the CCPA's requirements, including by adding new rights and establishing a new regulatory agency to implement and enforce the law.
+Added: Other states are considering or have also enacted privacy and data security laws, which increase compliance costs and resources.
+Added: Our actual or perceived noncompliance with these and other emerging state laws could harm our business.
+Added: We also use AI, including generative AI, and ML technologies in our products and services.
+Added: The development and use of AI/ML present various privacy and data security risks that may impact our business.
+Added: AI/ML are subject to privacy and data security laws, as well as increasing regulation and scrutiny.
+Added: Several jurisdictions worldwide, including Europe and certain U.S.
+Added: states, have proposed or
+Added: Unity Software Inc.
+Added: enacted laws governing AI/ML.
+Added: For example, the European Union is deliberating over legislation that would impose obligations on various actors in the AI value chain, and we expect other jurisdictions will adopt similar laws.
+Added: Additionally, certain privacy and data security laws extend rights to consumers and regulate automated decision making in ways that may be incompatible with our use of AI/ML.
+Added: These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, delete our models, or prevent or limit our use of AI/ML.
+Added: For example, the FTC has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML, as well as to delete algorithms and models derived from or trained on allegedly unlawfully collected data, where it has alleged the company has violated privacy and consumer protection laws.
+Added: If we cannot use AI/ML or that use is restricted, our business may be less efficient, and we may be at a competitive disadvantage.
+Added: In addition, some of our solutions employ technology to help creators build augmented and virtual reality applications, and their use to recognize and collect information about individuals could be perceived as subject to the emerging regulations relating to biometric privacy laws.
+Added: Actual or perceived noncompliance may expose us to litigation and regulatory risks.
+Added: There are emerging cases applying existing privacy and data security laws in the U.S., such as the federal and state wiretapping laws, in novel and potentially impactful ways that may affect our ability to offer certain solutions.
+Added: The outcome of these cases could cause us to make changes to our solutions to avoid costly litigation, government enforcement actions, damages, and penalties under these laws, which could adversely affect our business, results of operations, and our financial condition.
Another area of increasing focus by regulators is children's privacy.
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In addition to increasing government regulation, we have obligations relating to privacy and data security under our published policies and documentation, contracts and applicable industry standards.
−Removed: For example, we may also be subject to the PCI DSS, which requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
+Added: For example, we may also be subject to the Payment Card Industry Data Security Standard ("PCI DSS"), which requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
Noncompliance with PCI-DSS can result in penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses.
−Removed: Unity Software Inc.
Our business is materially reliant on revenue from behavioral, interest-based, or tailored advertising (collectively, "targeted advertising"), but delivering targeted advertisements is becoming increasingly difficult due to changes to our ability to gather information about user behavior through third party platforms, new laws and regulations, and consumer resistance.
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Other browsers, such as Firefox and Safari, have already adopted similar measures.
+Added: Unity Software Inc.
In addition, legislative proposals and present laws and regulations regulate the use of cookies and other tracking technologies, electronic communications, and marketing.
2 unchanged sentences
It is anticipated that the ePrivacy Regulation and national implementing laws will replace the current national laws implementing the ePrivacy Directive, which may require us to make significant operational changes.
−Removed: In the U.S., the CCPA, for example, grants California residents the right to opt-out of a company's sharing of personal data for advertising purposes in exchange for money or other valuable consideration and requires covered businesses to honor user-enabled browser signals from the Global Privacy Control.
+Added: In the U.S., state privacy laws, including the CCPA, grant residents the right to opt-out of most forms of targeted advertising (or to opt-in, in the case of residents under age 16).
+Added: Some of the laws also require covered businesses to honor certain user-enabled browser signals, such as the Global Privacy Control.
Partially as a result of these developments, individuals are becoming increasingly resistant to the collection, use, and sharing of personal data to deliver targeted advertising.
Individuals are now more aware of options related to consent, "do not track" mechanisms (such as browser signals from the Global Privacy Control), and "ad-blocking" software to prevent the collection of their personal information for targeted advertising purposes.
−Removed: As a result, we may be required to change the way we market our products, and any of these developments or changes could materially impair our ability to reach new or existing customers or otherwise negatively affect our operations.
+Added: As a result, we may be required to change the way we market our offerings, and any of these developments or changes could materially impair our ability to reach new or existing customers or otherwise negatively affect our operations.
Although we endeavor to comply with these obligations, we may have actually or allegedly failed to do so or have otherwise processed data improperly.
−Removed: For example, in 2019, we became aware of a research paper alleging that our software, including an older version of the Unity Editor, was inappropriately configured to collect hardware-based persistent identifiers, or MAC addresses.
−Removed: Although we did not use this information to measure behavior or track individuals as alleged by the researchers and we have disabled the configuration described in the paper, we could be subject to enforcement action or litigation alleging that this instance or our other data processing practices violate our contractual obligations, policies, federal or state laws prohibiting unfair or deceptive business practices, or other privacy laws.
+Added: The requirements imposed by rapidly changing privacy and data security laws, platform providers, and application stores require us to dedicate significant resources to compliance, and could also limit our ability to operate, harm our reputation, reduce demand for our solutions, and subject us to regulatory enforcement action, private litigation, and other liability.
+Added: Such occurrences could adversely affect our business, financial condition, and results of operations.
+Added: Our customers have sought increasingly stringent contractual obligations regarding privacy and data security.
+Added: These contractual obligations, and our efforts to comply with them, could be costly and harm our business.
In response to the increasing restrictions of global privacy and data security laws, our customers have sought and may continue to seek increasingly stringent contractual assurances regarding our handling of personal information and may adopt internal policies that limit their use of our Grow Solutions.
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If we fail to comply with these contractual obligations or standards, we may face substantial contractual liability or fines.
−Removed: The requirements imposed by rapidly changing privacy and data security laws, platform providers, and application stores require us to dedicate significant resources to compliance, and could also limit our ability to operate, harm our reputation, reduce demand for our products, and subject us to regulatory enforcement action, private litigation, and other liability.
−Removed: Such occurrences could adversely affect our business, financial condition, and results of operations.
−Removed: Unity Software Inc.
−Removed: Companies and governmental agencies may restrict access to platforms, our website, mobile applications, application stores or the Internet generally, which could lead to the loss or slower growth of our customers’ end users and negatively impact our operations.
+Added: Companies and governmental agencies may restrict access to our platforms, website, mobile applications, application stores or the Internet generally, which could lead to the loss or slower growth of our customers' end users and negatively impact our operations.
Governmental agencies in any of the countries in which we, our customers or end users are located, such as China, could block access to or require a license for our platform, our website, mobile applications, operating system platforms, application stores or the Internet generally for a number of reasons, including security, confidentiality or regulatory concerns.
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While our services were ultimately unblocked in that instance, if other countries block our data transfers or services or take similar action against us, our customers, our services, and our business could be harmed.
+Added: Unity Software Inc.
Adverse changes in the geopolitical relationship between the U.S.
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For example, U.S.
−Removed: export control regulations relating to China have created restrictions with respect to the sale of our products to various Chinese customers and further changes to regulations could result in additional restrictions.
+Added: export control regulations relating to China have created restrictions with respect to the sale of our solutions to various Chinese customers and further changes to regulations could result in additional restrictions.
Additionally, proposed restrictions in the U.S.
on outbound investment may impair our ability to support our subsidiaries in China, including our majority owned joint venture.
+Added: China also regulates the gaming industry, including on mobile and other games which has impacted our growth rates and any changes by the Chinese government with respect to the gaming industry could have a negative impact on our business.
Sustained uncertainty about, or worsening of, current global economic conditions and further escalation of trade tensions between the U.S.
and its trading partners, especially China, could result in a global economic slowdown and long-term changes to global trade, including retaliatory trade restrictions that further restrict our ability to operate in China.
−Removed: Any actions and policies adopted by the government of the People’s Republic of China ("PRC"), particularly with regard to intellectual property rights and existing cloud-based and Internet restrictions for non-Chinese businesses, or any prolonged slowdown in China’s economy, due to the COVID-19 pandemic or otherwise, could have an adverse effect on our business, results of operations and financial condition.
−Removed: In particular, PRC laws and regulations impose restrictions on foreign ownership of companies that engage in internet, market survey, cloud-based services and other related businesses from time to time.
−Removed: Accordingly, our ability to offer cloud-based services in China depends on our ability to implement and maintain structures that are acceptable under PRC laws.
+Added: Any actions and policies adopted by the government of the People's Republic of China ("PRC"), particularly with regard to intellectual property rights and existing cloud-based and Internet restrictions for non-Chinese businesses, or any prolonged slowdown in China's economy, could have an adverse effect on our business, results of operations and financial condition.
+Added: In particular, PRC laws and regulations impose restrictions on foreign ownership of companies that engage in internet, market survey, game publishing, cloud-based services and other related businesses from time to time.
+Added: Accordingly, our ability to offer game publishing and cloud-based services in China depends on our ability to implement and maintain structures that are acceptable under PRC laws.
Our failure to do so could harm our business, financial condition, and operating results.
−Removed: Unity Software Inc.
We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations.
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We are subject to governmental export and import controls and economic sanctions laws that could impair our ability to compete in global markets or subject us to liability if we violate the controls.
−Removed: Various countries in which we operate regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries.
+Added: Various countries in which we operate regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could
+Added: Unity Software Inc.
+Added: limit our ability to distribute our solutions or could limit our customers' ability to implement our solutions in those countries.
Our products and services are subject to export controls and economic sanctions laws and regulations of the United States and potentially other jurisdictions in which we have operations.
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sanctions or export control regulations, significant fines or penalties and possible incarceration for responsible employees and managers, as well as reputational harm and loss of business, could result.
−Removed: Any change in export or import regulations--including proposed additional regulation of encryption technology--economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell our products to, existing or potential customers with global operations which would adversely affect our business, results of operations, and growth prospects.
+Added: Any change in export or import regulations--including proposed additional regulation of encryption technology--economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell our solutions to, existing or potential customers with global operations which would adversely affect our business, results of operations, and growth prospects.
Sales to government entities and highly regulated organizations are subject to a number of challenges and risks.
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Selling to such entities can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale.
−Removed: Government demand and payment for solutions are affected by public sector budgetary cycles and funding authorizations and funding reductions or delays may adversely affect public sector demand that could develop for our solutions.
−Removed: Unity Software Inc.
+Added: Government demand and payment for solutions are affected by public sector budgetary cycles and funding authorizations, funding reductions, shutdowns by the federal government or other delays may adversely affect public sector demand that could develop for our solutions.
Further, these entities may demand or require contract terms and product features or certifications that differ from our standard arrangements and are less favorable or more difficult to maintain than our standard terms or product features.
+Added: If we are unable to agree to contracting requirements of governmental entities, we may be limited in our ability to sell our solutions to these customers.
Such entities may have statutory, contractual or other legal rights to terminate contracts with us or our partners for convenience or for other reasons.
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An increasing number of states have considered or adopted laws that attempt to impose sales tax collection obligations on out-of-state companies.
−Removed: Additionally, the Supreme Court of the United States ruled in South Dakota v.
−Removed: Wayfair, Inc.
−Removed: et al ("Wayfair") that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state.
−Removed: In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions.
Similarly, many foreign jurisdictions have considered or adopted laws that impose taxes on companies despite not having a physical presence in the foreign jurisdiction, including digital service taxes.
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This could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could harm our business and results of operations.
+Added: Unity Software Inc.
Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations.
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• changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
−Removed: • changes in tax laws, tax treaties, and regulations or the interpretation of them;
+Added: • changes in tax laws, tax treaties, and regulations or the interpretation of them, including Pillar One and Pillar Two related taxes as proposed by the OECD and which are being implemented by many jurisdictions in which we operate beginning in 2024.
+Added: At this time, we do not expect Pillar 2 legislation to have a material impact to our consolidated financial statement;
• changes to our assessment of our ability to realize our deferred tax assets that are based on estimates of our future results, the feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
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To the extent that such changes have a negative impact on us, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.
−Removed: Unity Software Inc.
The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, the relative amounts of income before taxes in the various jurisdictions in which we operate, new or revised tax laws, or interpretations of tax laws and policies, the outcome of current and future tax audits, examinations or administrative appeals, our ability to realize our deferred tax assets, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
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As of December 31, 2023, we had net operating loss ("NOL") carryforwards for U.S.
−Removed: federal, state, and foreign purposes of $785.8 million, $415.0 million and $1.1 billion, respectively, which may be available to offset taxable income in the future, and portions of which expire in various years beginning in 2024.
+Added: federal, state, and foreign purposes of $642 million, $398 million, and $936 million, respectively, which may be available to offset taxable income in the future, and portions of which expire in various years beginning in 2025.
A lack of future taxable income would adversely affect our ability to utilize a portion of these NOLs before they expire.
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In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
−Removed: For these reasons, we may not be able to utilize all of the NOLs, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition.
+Added: For these reasons, we may not be able to
+Added: Unity Software Inc.
+Added: utilize all of the NOLs, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition.
The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.
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In order to remain eligible for the tax benefits provided to a "Preferred Technological Enterprise" we must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended.
−Removed: If these tax benefits are reduced, canceled or discontinued, our Israeli taxable income from the Preferred Technological Enterprise would be subject to regular Israeli corporate tax rates.
+Added: If these tax benefits are reduced, canceled or discontinued, our Israeli taxable income from the Preferred Technological Enterprise would be subject to a higher corporate tax rate in Israel.
The standard corporate tax rate for Israeli companies has been 23% since 2018.
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We are and may in the future become subject to legal proceedings and claims that arise from time to time, such as claims brought by our customers in connection with commercial disputes, employment claims made by our current or former employees, or securities class action litigation suits.
−Removed: For example, we are currently defending against a putative securities class action complaint, and two derivative complaints, alleging that the Company and its executives made false or misleading statements and/or failed to disclose issues with the Company’s product platform.
+Added: For example, we are currently defending against a putative securities class action complaint, and related derivative complaints, alleging that we or our executives made false or misleading statements and/or failed to disclose issues with our product platform.
Any litigation or dispute, whether meritorious or not, and whether or not covered by insurance, could harm our reputation, will increase our costs and may divert management's attention, time and resources, which may in turn harm our business, financial condition and results of operations.
−Removed: Unity Software Inc.
We are subject to laws and regulations worldwide, many of which are unsettled and still developing and which could increase our costs or adversely affect our business.
We are subject to a variety of laws in the U.S.
−Removed: and abroad that affect our business, including state and federal laws regarding consumer protection, advertising, electronic marketing, protection of minors, privacy and data security, data localization requirements, online services, anti-competition, labor, real estate, taxation, intellectual property ownership and infringement, export and national security, tariffs, anti-corruption and telecommunications, all of which are continuously evolving and developing.
+Added: and abroad that affect our business, including state and federal laws regarding consumer protection, advertising, electronic marketing, protection of minors, AI, privacy and data security, data localization requirements, online services, anti-competition, labor, real estate, taxation, intellectual property ownership and infringement, export and national security, tariffs, anti-corruption and telecommunications, all of which are continuously evolving and developing, many of which are discussed in greater detail above.
The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly laws outside the U.S., and compliance with laws, regulations and similar requirements may be burdensome and expensive.
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Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could make our platform less attractive to our customers or cause us to change or limit our ability to sell our platform.
−Removed: We have policies and procedures designed to ensure compliance with applicable laws and regulations, but we cannot assure you that our employees, contractors or agents will not violate such laws and regulations or our policies and procedures.
−Removed: In particular, as a result of our Grow Solutions, we are potentially subject to a number of foreign and domestic laws and regulations that affect the offering of certain types of content, such as that which depicts violence, many of which are ambiguous, still evolving and could be interpreted in ways that could harm our business or expose us to liability.
−Removed: In addition, there are ongoing academic, political and regulatory discussions in the U.S., Europe, Australia and other jurisdictions regarding whether certain game mechanisms, such as loot boxes, and game genres, such as social casino, rewarded gaming and gambling, should be subject to a higher level or different type of regulation than other game genres or mechanics to protect consumers, in particular minors and persons susceptible to addiction, and, if so, what such regulation should include.
+Added: Our employees, contractors, or agents may violate such laws and regulations or our policies and procedures, which could harm our business.
+Added: For example, as a result of our Grow Solutions, we are potentially subject to a number of foreign and domestic laws and regulations that affect the offering of certain types of content, such as that which depicts violence, many of which are ambiguous, still evolving and could be interpreted in ways that could harm our business or expose us to liability.
+Added: In addition, there are ongoing academic, political and regulatory discussions in various jurisdictions regarding whether certain game mechanisms, such as loot boxes, and game genres, such as social casino, rewarded gaming and gambling, should be subject to a higher level or different type of regulation than other game genres or mechanics to protect consumers, in particular minors and persons susceptible to addiction, and, if so, what such regulation should include.
New regulation by the U.S.
−Removed: federal government and its agencies, such as the FTC, U.S.
−Removed: states and state agencies or foreign jurisdictions, which may vary significantly across jurisdictions, could require that certain game content be modified or removed from games, increase the costs of operating our customer’s games, impact player engagement and thus the functionality and effectiveness of our Grow Solutions or otherwise harm our business performance.
+Added: federal government and its agencies, such as the Federal Trade Commission ("FTC"), U.S.
+Added: states and state agencies or foreign jurisdictions, which may vary significantly across jurisdictions, could require that certain game content be modified or removed from games, increase the
+Added: Unity Software Inc.
+Added: costs of operating our customer's games, impact player engagement and thus the functionality and effectiveness of our Grow Solutions or otherwise harm our business performance.
For example, one of our acquired products within our Grow Solutions, Tapjoy's Offerwall, is subject to certain obligations under a consent order which resulted from an FTC investigation.
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Any costs incurred as a result of this potential liability could harm our business, financial condition, or results of operations.
−Removed: Unity Software Inc.
It is possible that a number of laws and regulations may be adopted or construed to apply to us or our customers in the U.S.
−Removed: and elsewhere that could restrict the online and mobile industries, including player privacy, advertising, taxation, content suitability, copyright, distribution and antitrust, and our solutions or components thereof may be deemed or perceived illegal or unfair practices.
+Added: and elsewhere that could restrict the online and mobile industries, including player privacy, advertising, taxation, content suitability, copyright, distribution, antitrust, and the use of artificial intelligence, and therefore our solutions or components may be deemed or perceived illegal or unfair practices.
Furthermore, the growth and development of electronic commerce and virtual items may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as us and our customers conducting business through the Internet and mobile devices.
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Our Notes and the issuance of shares of our common stock upon conversion of the Notes, if any, may impact our financial results, result in dilution to our stockholders, create downward pressure on the price of our common stock, and restrict our ability to raise additional capital or to engage in a beneficial takeover.
−Removed: Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
−Removed: Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
−Removed: If the assumptions underlying our cash flow guidance are incorrect, our business may not continue to generate cash flow from operations in the future sufficient to service our debt.
−Removed: If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or issuing additional equity, equity-linked or debt instruments on terms that may be onerous or highly dilutive.
−Removed: Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
−Removed: If we are unable to engage in any of these activities or engage in these activities on desirable terms, we may be unable to meet the obligations of our Notes, which would materially and adversely impact our business, financial condition and operating results.
−Removed: In addition, if shares of our common stock are issued to the holders of the Notes upon conversion, there will be dilution to our stockholders’ equity and the market price of our common stock may decrease due to the additional selling pressure in the market.
−Removed: Any downward pressure on the price of our common stock caused by the sale, or potential sale, of shares issuable upon conversion of the Notes could also encourage short sales by third parties, creating additional downward pressure on our share price.
−Removed: Certain provisions in the indenture governing the Notes may delay or prevent an otherwise beneficial takeover attempt of us.
−Removed: For example, a takeover of us may trigger a requirement in each indenture governing the Notes that we repurchase the Notes and/or increase the conversion rate, which could make it costlier for a potential acquirer to engage in such takeover.
−Removed: Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.
+Added: In November 2022, we issued $1.0 billion in aggregate principal amount of 2.0% convertible senior notes due 2027 (the "2027 Notes"), and in November 2021 we issued $1.7 billion in aggregate principal amount of 0% convertible senior notes due 2026 (the "2026 Notes," together with the 2027 Notes, the "Notes").
+Added: We are subject to a variety of risks related to the Notes, such as:
+Added: • servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt, and our ability to make scheduled payments of the principal and interest, or to refinance or repurchase our Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control;
+Added: • our ability to refinance or repurchase our indebtedness will depend on the capital markets and our financial condition at such time, and if we are unable to engage in any of these activities or engage in these activities on desirable terms, we may be unable to meet the obligations of our Notes;
Unity Software Inc.
+Added: • if shares of our common stock are issued to the holders of the Notes upon conversion, there will be dilution to our stockholders' equity and the market price of our common stock may decrease due to the additional selling pressure in the market.
+Added: Any such downward pressure on the price of our common stock could also encourage short sales by third parties, creating additional downward pressure on our share price;
+Added: • certain provisions in the indentures governing the Notes may delay or prevent an otherwise beneficial takeover attempt of us;
• We may from time to time seek to retire or purchase our outstanding debt, including the Notes, through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise.
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Further, any such purchases or exchanges may result in us acquiring and retiring a substantial amount of such indebtedness, which could impact the trading liquidity of such indebtedness.
−Removed: The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
−Removed: In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled under each indenture to convert their notes at any time during specified periods at their option.
−Removed: If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
−Removed: As of December 31, 2022, the Notes are not convertible at the option of the holder.
−Removed: In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
+Added: • the conditional conversion feature of the Notes, if triggered, may adversely affect our liquidity if we are required to settle a portion or all of our conversion obligation through the payment of cash.
The capped call transactions may affect the value of the 2026 Notes and our common stock.
−Removed: In connection with the issuance of the 2026 Notes, we entered into capped call transactions (the "Capped Call Transactions") with certain of the initial purchasers of the 2026 Notes or affiliates thereof and other financial institutions (the "option counterparties").
−Removed: The Capped Call Transactions cover, subject to customary adjustments, the number of shares of our common stock initially underlying the 2026 Notes.
+Added: In addition, in connection with the issuance of the 2026 Notes, we entered into capped call transactions (the "Capped Call Transactions") with certain of the initial purchasers of the 2026 Notes or affiliates thereof and other financial institutions (the "option counterparties").The Capped Call Transactions cover, subject to customary adjustments, the number of shares of our common stock initially underlying the 2026 Notes.
The Capped Call Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2026 Notes, as the case may be, with such reduction and/or offset subject to a cap.
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Any of these activities could adversely affect the value of the 2026 Notes and our common stock.
+Added: The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
+Added: In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled under each indenture to convert their notes at any time during specified periods at their option.
+Added: If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
+Added: As of December 31, 2023, the Notes are not convertible at the option of the holder.
+Added: In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the
+Added: Unity Software Inc.
+Added: Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
We are subject to counterparty risk with respect to the Capped Call Transactions.
−Removed: The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Capped Call Transactions.
+Added: In addition, the option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Capped Call Transactions.
Our exposure to the credit risk of the option counterparties will not be secured by any collateral.
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We can provide no assurances as to the financial stability or viability of the option counterparties.
−Removed: Unity Software Inc.
Risks Related to Ownership of Our Common Stock
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Our share repurchase program, while intended to help offset dilution from the ironSource Merger, may not achieve such goal and the amount of such repurchases may be impacted by new legislation.
−Removed: The proceeds from the PIPE have been and are expected to be continued to be used to partially fund the repurchase of up to $2.5 billion of shares of our common stock pursuant to our previously announced stock repurchase program, with the objective to offset potential dilution to our stockholders as a result of the issuance of the ironSource Merger consideration.
+Added: The proceeds from the issuance and sale of the 2027 Notes (the "PIPE") have been and are expected to be continued to be used to partially fund the repurchase of up to $2.5 billion of shares of our common stock pursuant to our previously announced stock repurchase program, with the objective to offset potential dilution to our stockholders as a result of the issuance of the ironSource Merger consideration.
However, we are not obligated to repurchase any shares of our common stock and there is no assurance that we will do so on the timeline intended.
+Added: As of December 31, 2023, $750 million remains available for future share repurchases under this program.
While we expect the share repurchases to be accretive to our earnings per share, there may be factors that will reduce the expected anti-dilutive effects of the potential repurchases.
−Removed: Although the 2027 Notes were priced at a premium to the market price of our common stock at the time of signing, and we intend to repurchase the shares at prices lower than the conversion price of the 2027 Notes, we can't provide any assurance that our stock price will not fluctuate significantly prior to any share repurchases, including as a result of downward pressure on the price of our common stock caused by the conversion of the 2027 Notes, as discussed above.
−Removed: As a result, if we are unable to repurchase shares of our common stock at a price that is lower than the conversion price of the 2027 Notes, any anti-dilutive effect of such repurchases may be less than expected and dilution resulting from the issuance of merger consideration may be more than expected.
+Added: Although the 2027 Notes were priced at a premium to the market price of our common stock at the time of signing, and we intend to repurchase the shares at prices lower than the conversion price of the 2027 Notes, we can't provide any assurance that our stock price will not fluctuate significantly prior to any share repurchases, including as a result of downward pressure on the price of our common stock caused by the conversion of the 2027 Notes.
+Added: As a result, if we are unable to repurchase shares of our common stock at a price that is
+Added: Unity Software Inc.
+Added: lower than the conversion price of the 2027 Notes, any anti-dilutive effect of such repurchases may be less than expected and dilution resulting from the issuance of merger consideration may be more than expected.
In addition, repurchases are subject to the 1% Share Repurchase Excise Tax enacted by the Inflation Reduction Act, which may be offset by shares newly issued during that fiscal year (the "Share Repurchase Excise Tax").
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Our executive officers, directors, and current beneficial owners of 5% or more of our common stock beneficially own a significant percentage of our outstanding common stock.
−Removed: These persons, acting together, will be able to significantly influence all matters requiring stockholder approval, including the
−Removed: Unity Software Inc.
−Removed: election and removal of directors and any merger or other significant corporate transactions.
+Added: These persons, acting together, will be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions.
The interests of this group of stockholders may not coincide with the interests of other stockholders.
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We may also raise capital through the sale and issuance of equity securities or convertible securities in the future.
−Removed: As part of our business strategy, we have in the past made acquisitions and investments, and issued equity securities to pay for such acquisitions or investments.
−Removed: For example, we issued 112,547,375 shares in the ironSource Merger.
−Removed: We may continue to acquire or make investments in companies, products or technologies and issue equity securities to pay for any such acquisition or investment.
+Added: As part of our business strategy, we have in the past issued, and in the future may issue, equity securities to pay for acquisitions or investments.
Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.
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Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
−Removed: We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
−Removed: As a public company, we incur significant legal, accounting, and other expenses.
−Removed: The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE, and other applicable securities rules and regulations impose various requirements on public companies.
−Removed: Our management and other personnel devote a substantial amount of time to compliance with these requirements.
−Removed: Moreover, these rules and regulations may change from time to time.
−Removed: Monitoring such changes, and updating our procedures to comply with any such changes, may increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
−Removed: We cannot predict or estimate the totality of any such additional costs we incur as a public company or the specific timing of such costs.
−Removed: Unity Software Inc.
−Removed: We are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.
+Added: If we are unable to maintain proper and effective internal controls over financial reporting, investor confidence in our company may be adversely affected and, as a result, the value of our common stock may be impacted.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
−Removed: This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
+Added: This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting.
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In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes.
−Removed: Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of internal control over financial reporting.
−Removed: Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise.
−Removed: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, and we could lose access to the capital markets.
−Removed: The growth and expansion of our business places a continuous, significant strain on our operational and financial resources, including as a result of the ironSource Merger.
−Removed: Further growth of our operations to support our customer base, our IT systems and our internal controls and procedures may not be adequate to support our operations.
−Removed: For example, we are still in the process of implementing IT and accounting systems, and integrating these systems with ironSource's, to help manage critical functions such as billing and financial forecasts.
−Removed: Our failure to improve our systems and processes, or their failure to operate in the intended manner, whether as a result of the growth of our business, including the integration of ironSource, or otherwise, may result in our inability to accurately forecast our revenue and expenses, or to prevent certain losses.
−Removed: Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely and reliable reports on our financial and operating results and could impact the effectiveness of our internal control over financial reporting.
−Removed: In addition, our systems and processes may not prevent or detect all errors, omissions, or fraud.
+Added: Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of
Unity Software Inc.
+Added: internal control over financial reporting.
+Added: Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise.
+Added: In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed or other potential matters that may raise concerns for investors.
+Added: Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
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If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business.
−Removed: Unresolved Staff Comments
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.