Unity Software Inc. 10-Q

Item 1. Financial Statements UNITY SOFTWARE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) As of June 30, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 1,691,045 $ 1,517,672 Accounts receivable, net 596,560 573,884 Prepaid expenses and other 120,171 133,795 Total current assets 2,407,776 2,225,351 Property and equipment, net 82,426 98,819 Goodwill 3,166,304 3,166,304 Intangible assets, net 894,367 1,066,235 Other assets 165,551 180,698 Total assets $ 6,716,424 $ 6,737,407 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 12,248 $ 13,948 Accrued expenses and other 278,850 294,951 Publisher payables 372,719 394,284 Deferred revenue 219,448 186,304 Total current liabilities 883,265 889,487 Convertible notes 2,233,255 2,238,922 Long-term deferred revenue 15,480 16,846 Other long-term liabilities 150,349 165,004 Total liabilities 3,282,349 3,310,259 Commitments and Contingencies (Note 7) Redeemable noncontrolling interests 240,697 230,627 Stockholders' equity: Common stock, $ 0.000005 par value: Authorized shares - 1,000,000 and 1,000,000 Issued and outstanding shares - 420,441 and 409,393 2 2 Additional paid-in capital 7,116,124 6,936,038 Accumulated other comprehensive loss ( 6,349 ) ( 9,425 ) Accumulated deficit ( 3,922,384 ) ( 3,735,944 ) Total Unity Software Inc. stockholders' equity 3,187,393 3,190,671 Noncontrolling interest 5,985 5,850 Total stockholders' equity 3,193,378 3,196,521 Total liabilities and stockholders' equity $ 6,716,424 $ 6,737,407 See accompanying Notes to Condensed Consolidated Financial Statements. Table of Contents Unity Software Inc. UNITY SOFTWARE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Revenue $ 440,944 $ 449,259 $ 875,944 $ 909,639 Cost of revenue 114,211 108,875 228,168 253,262 Gross profit 326,733 340,384 647,776 656,377 Operating expenses Research and development 214,807 208,935 435,432 491,663 Sales and marketing 161,513 169,854 323,526 400,479 General and administrative 69,165 91,015 135,505 268,584 Total operating expenses 445,485 469,804 894,463 1,160,726 Loss from operations ( 118,752 ) ( 129,420 ) ( 246,687 ) ( 504,349 ) Interest expense ( 6,030 ) ( 5,829 ) ( 11,921 ) ( 11,864 ) Interest income and other income (expense), net 19,837 10,457 77,948 87,100 Loss before income taxes ( 104,945 ) ( 124,792 ) ( 180,660 ) ( 429,113 ) Provision for (benefit from) Income taxes 2,420 946 4,612 ( 11,897 ) Net loss ( 107,365 ) ( 125,738 ) ( 185,272 ) ( 417,216 ) Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interests 1,433 ( 164 ) 1,168 ( 568 ) Net loss attributable to Unity Software Inc. $ ( 108,798 ) $ ( 125,574 ) $ ( 186,440 ) $ ( 416,648 ) Basic and diluted net loss per share attributable to Unity Software Inc. $ ( 0.26 ) $ ( 0.32 ) $ ( 0.45 ) $ ( 1.07 ) Weighted-average shares used in computation of basic and diluted net loss per share 417,566 392,537 414,696 389,844 See accompanying Notes to Condensed Consolidated Financial Statements. 2 Table of Contents Unity Software Inc. UNITY SOFTWARE INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Net loss $ ( 107,365 ) $ ( 125,738 ) $ ( 185,272 ) $ ( 417,216 ) Other comprehensive income (loss), net of taxes: Change in foreign currency translation adjustment 2,716 ( 1,393 ) 3,894 ( 4,854 ) Other comprehensive income (loss) 2,716 ( 1,393 ) 3,894 ( 4,854 ) Comprehensive loss ( 104,649 ) ( 127,131 ) ( 181,378 ) ( 422,070 ) Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interests 1,433 ( 164 ) 1,168 ( 568 ) Foreign currency translation attributable to noncontrolling interest and redeemable noncontrolling interests 564 ( 255 ) 818 ( 965 ) Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interests 1,997 ( 419 ) 1,986 ( 1,533 ) Comprehensive loss attributable to Unity Software Inc. $ ( 106,646 ) $ ( 126,712 ) $ ( 183,364 ) $ ( 420,537 ) See accompanying Notes to Condensed Consolidated Financial Statements. 3 Table of Contents Unity Software Inc. UNITY SOFTWARE INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) (Unaudited) Three Months Ended June 30, 2025 Accumulated Additional Other Unity Software Inc. Common Stock Paid-In Comprehensive Accumulated Stockholders' Noncontrolling Total Shares Amount Capital Loss Deficit Equity Interest (1) Equity Balance at March 31, 2025 415,406,492 $ 2 $ 7,008,134 $ ( 8,501 ) $ ( 3,813,586 ) $ 3,186,049 $ 5,849 $ 3,191,898 Issuance of common stock from employee equity plans 1,170,423 9,783 9,783 9,783 Issuance of common stock for settlement of RSUs 3,863,949 — — Stock‑based compensation expense 102,303 102,303 102,303 Net loss ( 108,798 ) ( 108,798 ) 98 ( 108,700 ) Adjustments to redeemable noncontrolling interest ( 4,096 ) ( 4,096 ) ( 4,096 ) Other comprehensive income 2,152 2,152 38 2,190 Balance at June 30, 2025 420,440,864 $ 2 $ 7,116,124 $ ( 6,349 ) $ ( 3,922,384 ) $ 3,187,393 $ 5,985 $ 3,193,378 Three Months Ended June 30, 2024 Accumulated Additional Other Unity Software Inc. Common Stock Paid-In Comprehensive Accumulated Stockholders' Noncontrolling Total Shares Amount Capital Loss Deficit Equity Interest (1) Equity Balance at March 31, 2024 390,396,930 $ 2 $ 6,554,787 $ ( 7,760 ) $ ( 3,362,904 ) $ 3,184,125 $ 5,863 $ 3,189,988 Issuance of common stock from employee equity plans 1,904,693 — 11,305 — — 11,305 — 11,305 Issuance of common stock for settlement of RSUs 3,142,675 — — — — — — — Stock‑based compensation expense — — 117,678 — — 117,678 — 117,678 Net loss — — — — ( 125,574 ) ( 125,574 ) ( 11 ) ( 125,585 ) Adjustments to redeemable noncontrolling interest — — ( 1,710 ) — — ( 1,710 ) — ( 1,710 ) Other comprehensive loss — — — ( 1,138 ) — ( 1,138 ) ( 18 ) ( 1,156 ) Balance at June 30, 2024 395,444,298 $ 2 $ 6,682,060 $ ( 8,898 ) $ ( 3,488,478 ) $ 3,184,686 $ 5,834 $ 3,190,520 . (1) Excludes redeemable noncontrolling interests. See accompanying Notes to Condensed Consolidated Financial Statements. 4 Table of Contents Unity Software Inc. UNITY SOFTWARE INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY—CONTINUED (In thousands, except share data) (Unaudited) Six Months Ended June 30, 2025 Accumulated Additional Other Unity Software Inc. Common Stock Paid‑In Comprehensive Accumulated Stockholders’ Noncontrolling Total Shares Amount Capital Loss Deficit Equity Interest (1) Equity Balance at December 31, 2024 409,392,524 $ 2 $ 6,936,038 $ ( 9,425 ) $ ( 3,735,944 ) $ 3,190,671 $ 5,850 $ 3,196,521 Issuance of common stock from employee equity plans 4,137,252 31,394 31,394 31,394 Issuance of common stock for settlement of RSUs 6,911,088 — — Purchase of capped calls ( 44,436 ) ( 44,436 ) ( 44,436 ) Stock‑based compensation expense 201,347 201,347 201,347 Net loss ( 186,440 ) ( 186,440 ) 80 ( 186,360 ) Adjustments to redeemable noncontrolling interest ( 8,219 ) ( 8,219 ) ( 8,219 ) Other comprehensive income 3,076 3,076 55 3,131 Balance at June 30, 2025 420,440,864 $ 2 $ 7,116,124 $ ( 6,349 ) $ ( 3,922,384 ) $ 3,187,393 $ 5,985 $ 3,193,378 Six Months Ended June 30, 2024 Accumulated Additional Other Unity Software Inc. Common Stock Paid-In Comprehensive Accumulated Stockholders' Noncontrolling Total Shares Amount Capital Loss Deficit Equity Interest (1) Equity Balance at December 31, 2023 384,871,561 $ 2 $ 6,259,479 $ ( 5,009 ) $ ( 3,071,830 ) $ 3,182,642 $ 5,939 $ 3,188,581 Issuance of common stock from employee equity plans 4,416,613 — 37,302 — — 37,302 — 37,302 Issuance of common stock for settlement of RSUs 6,156,124 — — — — — — — Stock‑based compensation expense — — 386,966 — — 386,966 — 386,966 Net loss — — — — ( 416,648 ) ( 416,648 ) ( 39 ) ( 416,687 ) Adjustments to redeemable noncontrolling interest — — ( 1,687 ) — — ( 1,687 ) — ( 1,687 ) Other comprehensive loss — — — ( 3,889 ) — ( 3,889 ) ( 66 ) ( 3,955 ) Balance at June 30, 2024 395,444,298 $ 2 $ 6,682,060 $ ( 8,898 ) $ ( 3,488,478 ) $ 3,184,686 $ 5,834 $ 3,190,520 (1) Excludes redeemable noncontrolling interests. See accompanying Notes to Condensed Consolidated Financial Statements 5 Table of Contents Unity Software Inc. UNITY SOFTWARE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2025 2024 Operating activities Net loss $ ( 185,272 ) $ ( 417,216 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 193,145 203,219 Stock-based compensation expense 200,394 381,276 Gain on repayment of convertible note ( 42,744 ) ( 61,371 ) Impairment of property and equipment 4,049 21,918 Other ( 7,972 ) 15,383 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net ( 22,061 ) 38,066 Prepaid expenses and other 13,771 ( 19,815 ) Other assets 11,889 ( 2,386 ) Accounts payable ( 2,099 ) ( 460 ) Accrued expenses and other ( 13,612 ) ( 40,301 ) Publisher payables ( 21,565 ) 3,140 Other long-term liabilities ( 12,861 ) ( 34,636 ) Deferred revenue 31,060 ( 5,814 ) Net cash provided by operating activities 146,122 81,003 Investing activities Purchases of non-marketable investments ( 2,000 ) — Purchases of intangible assets — ( 360 ) Purchases of property and equipment ( 12,164 ) ( 15,956 ) Net cash used in investing activities ( 14,164 ) ( 16,316 ) Financing activities Proceeds from issuance of convertible notes 690,000 — Purchase of capped calls ( 44,436 ) — Payment of debt issuance costs ( 13,236 ) — Repayments of convertible note ( 641,691 ) ( 414,999 ) Proceeds from issuance of common stock from employee equity plans 31,394 37,302 Net cash provided by (used in) financing activities 22,031 ( 377,697 ) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 19,637 ( 9,460 ) Increase (decrease) in cash, cash equivalents, and restricted cash 173,626 ( 322,470 ) Cash, cash equivalents, and restricted cash, beginning of period 1,527,881 1,604,267 Cash, cash equivalents, and restricted cash, end of period $ 1,701,507 $ 1,281,797 Supplemental disclosure of cash flow information: Cash paid for interest $ 10,000 $ 10,000 Cash paid for (refunded from) income taxes, net $ ( 3,079 ) $ 16,307 Cash paid for operating leases $ 20,915 $ 26,658 Supplemental disclosures of non‑cash investing and financing activities: Assets acquired under operating lease $ 5,406 $ 13,859 See accompanying Notes to Condensed Consolidated Financial Statements. 6 Table of Contents Unity Software Inc. UNITY SOFTWARE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Accounting Policies Basis of Presentation and Consolidation We prepared the accompanying unaudited condensed consolidated financial statements in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. The condensed consolidated financial statements include the accounts of Unity Software Inc., its wholly owned subsidiaries, and entities consolidated under the voting interest model. We have eliminated all intercompany balances and transactions. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, all adjustments, which include normal recurring adjustments necessary for a fair presentation, have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year or other periods. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our 2024 Annual Report on Form 10-K. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material to our financial position and results of operations. We review the useful lives of assets with a finite life on a recurring basis. Effective July 1, 2025, we revised our estimate of the remaining useful life for certain intangible assets from four to seven years , down to one to three years . These assets are included in “Intangible assets, net” on our consolidated balance sheets, are primarily “developed technology” within intangible assets, and primarily relate to assets arising from our acquisition of Wētā FX Limited in 2023. The shortened useful lives are due to certain assets no longer being actively developed and absence of currently established plans for incorporation into future Unity offerings. The effect of this change in estimate for the year ending December 31, 2025, is anticipated to be an increase in amortization expense and decrease in operating income of approximately $ 77 million. Employee Separation and Restructuring Costs In the six months ended June 30, 2025, we incurred incremental employee separation costs of approximately $ 20 million, primarily within sales and marketing and research and development. In the six months ended June 30, 2024, we incurred incremental employee separation costs of approximately $ 201 million, which included $ 128 million of incremental stock-based compensation. Of the incremental employee separation costs we incurred in the six months ended June 30, 2024, $ 15 million are within cost of revenue, $ 44 million are within research and development, $ 52 million are within sales and marketing, and $ 90 million are within general and administrative. Additionally, for the six months ended June 30, 2025 and 2024, we incurred $ 11 million and $ 38 million, respectively, of other restructuring costs, primarily related to office closures. 7 Table of Contents Unity Software Inc. 2. Revenue The following table presents our revenue disaggregated by source, which also have similar economic characteristics (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Create Solutions $ 153,782 $ 150,777 $ 304,160 $ 314,447 Grow Solutions 287,162 298,482 571,784 595,192 Total revenue $ 440,944 $ 449,259 $ 875,944 $ 909,639 The following table presents our revenue disaggregated by geography, based on the invoice address of our customers (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 United States $ 122,367 $ 130,843 $ 248,655 $ 269,962 Greater China (1) 83,575 62,063 148,777 121,753 EMEA (2) 140,809 164,064 293,309 330,834 APAC (3) 83,295 81,119 163,376 165,155 Other Americas (4) 10,898 11,170 21,827 21,935 Total revenue $ 440,944 $ 449,259 $ 875,944 $ 909,639 (1) Greater China includes China, Hong Kong, and Taiwan. (2) Europe, the Middle East, and Africa ("EMEA") (3) Asia-Pacific, excluding Greater China ("APAC") (4) Canada and Latin America ("Other Americas") Accounts Receivable, Net Accounts receivable are recorded at the original invoiced amount, net of allowances for uncollectible amounts. We estimate losses on uncollectible amounts based on expected losses, including our historical experience of actual losses. The estimated losses on uncollectible amounts are recorded in general and administrative expense on our condensed consolidated statements of operations. As of June 30, 2025 and December 31, 2024, the allowance for uncollectible amounts was $ 13.2 million and $ 17.3 million, respectively. For the six months ended June 30, 2025 and 2024, the provision for uncollectible amounts was $ 0.6 million and $ 5.3 million, respectively. Sales Commissions Sales commissions that have a benefit beyond one year are capitalized and amortized on a straight-line method over the expected period of benefit, which is generally three years . As of June 30, 2025, capitalized commissions, net of amortization, included in prepaid expenses and other and other assets were $ 6.2 million and $ 3.7 million, respectively. As of December 31, 2024, capitalized commissions, net of amortization, included in prepaid expenses and other and other assets were $ 6.5 million and $ 5.4 million, respectively. During the three and six months ended June 30, 2025, we recorded amortization costs of $ 1.9 million and $ 3.8 million in sales and marketing expenses, as compared to $ 2.3 million and $ 4.7 million during the three and six months ended June 30, 2024. We did not incur any impairment losses for the six months ended June 30, 2025 and 2024. Contract Balances and Remaining Performance Obligations Contract assets (unbilled receivables), primarily included in accounts receivable, net, are recorded when revenue is earned in advance of customer billing schedules. Unbilled receivables totaled $ 20.8 8 Table of Contents Unity Software Inc. million and $ 20.5 million as of June 30, 2025 and December 31, 2024, respectively. The long term portion of those unbilled receivables was included in other long-term assets on our consolidated balance sheets, and was not material as of June 30, 2025 and December 31, 2024. Contract liabilities (deferred revenue) relate to payments received in advance of performance under the contract. Revenue recognized during the six months ended June 30, 2025 that was included in the deferred revenue balances at January 1, 2025 was $ 130 million. Additionally, we have performance obligations associated with commitments in customer contracts to perform in the future that had not yet been recognized in our consolidated financial statements. For contracts with original terms that exceed one year, those commitments not yet recognized as of June 30, 2025, were $ 400 million and relate primarily to Create Solutions subscriptions, Enterprise Support, and Strategic Partnerships. These commitments generally extend over the next one to five years and we expect to recognize approximately $ 183 million or 46 % of this revenue during the next 12 months. 3. Financial Instruments Cash, Cash Equivalents, and Restricted Cash Cash, cash equivalents, and restricted cash are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: • Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities. • Level 2—Valuations based on quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration. • Level 3—Valuations based on unobservable inputs reflecting our own assumptions used to measure assets and liabilities at fair value. These valuations require significant judgment. The following table summarizes, by major security type, our cash, cash equivalents, and restricted cash that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands): June 30, 2025 December 31, 2024 Fair Value (1) Cash $ 829,573 $ 995,802 Level 1: Restricted cash and cash equivalents: Restricted cash $ 10,462 $ 10,209 Money market funds 367,842 327,333 Time deposits 493,630 194,537 Total restricted cash and cash equivalents $ 871,934 $ 532,079 Total cash, cash equivalents, and restricted cash $ 1,701,507 $ 1,527,881 (1) Due to the highly liquid nature of our investments, amortized cost approximates fair value. Nonrecurring Fair Value Measurements We hold equity investments in certain unconsolidated entities without a readily determinable fair value. These strategic investments represent less than a 20 % ownership interest in each of the entities, and we do not have significant influence over or control of the entities. We use the measurement alternative to account for adjustments to these investments for observable transactions for the same or similar investments of the same issuer in any given quarter. If we determine an impairment has occurred, the investment is written down to the estimated fair value. As of June 30, 2025 and December 31, 2024, 9 Table of Contents Unity Software Inc. such equity investments totaled $ 35.0 million and $ 33.0 million, respectively. No material adjustments to the carrying value of these equity investments were recorded for the three and six months ended June 30, 2025 and 2024. 4. Investment in Unity China The results of Unity China, of which third-party investors hold a 20.5 % ownership interest, are included in our condensed consolidated financial statements. Under certain conditions we may be required to repurchase the third-party interest in Unity China. The redeemable noncontrolling interests in Unity China are recorded as temporary equity on our condensed consolidated balance sheet. The following table presents the changes in redeemable noncontrolling interests (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Balance at beginning of period $ 234,740 $ 224,736 $ 230,627 $ 225,797 Net gain/(loss) attributable to redeemable noncontrolling interests 1,335 ( 153 ) 1,088 ( 529 ) Accretion for redeemable noncontrolling interests 1,556 2,867 4,591 5,942 Foreign currency translation and foreign exchange adjustments for redeemable noncontrolling interests 3,066 ( 1,394 ) 4,391 ( 5,154 ) Balance at end of period $ 240,697 $ 226,056 $ 240,697 $ 226,056 5. Leases We have operating leases for offices, which have remaining lease terms of up to eight years . Components of lease expense were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Operating lease expense $ 8,144 $ 10,579 $ 15,572 $ 20,832 Variable lease expense 1,301 1,497 2,574 3,218 Sublease income ( 816 ) ( 552 ) ( 1,513 ) ( 796 ) Total lease expense $ 8,629 $ 11,524 $ 16,633 $ 23,254 Supplemental balance sheet information related to leases was as follows (in thousands, except weighted-average figures): As of Classification June 30, 2025 December 31, 2024 Operating lease assets Other assets $ 69,599 $ 78,562 Current operating lease liabilities Accrued expenses and other $ 31,950 $ 33,703 Long-term operating lease liabilities Other long-term liabilities 75,855 81,093 Total operating lease liabilities $ 107,805 $ 114,796 As of June 30, 2025 and December 31, 2024, our operating leases had a weighted-average remaining lease term of 4.2 years and 4.3 years, respectively, and a weighted-average discount rate of 5.6 % and 5.4 %, respectively. During the three and six months ended June 30, 2024, we recorded $ 8.6 million and $ 12.2 million, respectively, of impairment charges on operating lease assets, primarily within general and administrative. 10 Table of Contents Unity Software Inc. As of June 30, 2025, our lease liabilities were as follows (in thousands): Operating Leases Gross lease liabilities $ 120,667 Less: imputed interest 12,862 Present value of lease liabilities $ 107,805 As of June 30, 2025, we have entered into a lease that has not yet commenced with future minimum lease payments of $ 7.2 million which are not yet reflected on our consolidated balance sheet. The operating lease will commence in 2025 with lease terms of approximately seven years . 6. Borrowings Convertible Notes In February 2025, we issued an aggregate of $ 690 million principal amount of 0 % Convertible Senior Notes due 2030 (the "2030 Notes"). Proceeds from the issuance of the 2030 Notes were $ 677 million, net of debt issuance costs and the cash was used to purchase capped call transactions, and repurchase convertible notes as discussed below. The debt issuance costs are amortized to interest expense using the straight-line method, which approximates the effective interest method. As of June 30, 2025, we had $ 2.2 billion of unsecured convertible notes outstanding including $ 690 million of the 2030 Notes, $ 1.0 billion issued in November 2022 (the "2027 Notes"), $ 558 million issued in November 2021 (the "2026 Notes", together with the 2027 Notes and 2030 Notes, the "Notes"). The table below summarizes the principal and unamortized debt issuance costs and other material features of the Notes (in thousands): Carrying Amount as of Conversion Rate per $1,000 Principal Conversion Price (1) Maturities Stated Interest Rates June 30, 2025 December 31, 2024 Convertible notes: Principal – 2026 Notes 3.2392 $ 308.72 2026 0.0 % $ 557,724 $ 1,245,232 Principal – 2027 Notes 20.4526 $ 48.89 2027 2.0 % 1,000,000 1,000,000 Principal – 2030 Notes 27.6656 $ 36.15 2030 0.0 % 690,000 — Unamortized debt issuance costs, net ( 14,469 ) ( 6,310 ) Net carrying amount $ 2,233,255 $ 2,238,922 1) We entered into capped call transactions in connection with the 2026 and 2030 Notes. The cap price of the capped call transactions relating to the Notes was initially $ 343.02 and $ 47.74 , respectively, subject to certain adjustments under the terms of the capped call transactions. See below "--Capped Call Transactions." Interest on the Notes is payable semi-annually in arrears. The combined interest expense on the Notes related to regular interest and the amortization of debt issuance cost was $ 6.0 million and $ 11.9 million for the three and six months ended June 30, 2025, respectively, and $ 5.8 million and $ 11.9 million for the three and six months ended June 30, 2024, respectively. As of June 30, 2025, the estimated fair value of the 2030 Notes was approximately $ 710 million. As of June 30, 2025 and December 31, 2024, the estimated fair value of the 2027 Notes was approximately $ 1.0 billion, and the estimated fair value of the 2026 Notes was approximately $ 520 million and $ 1.1 billion, respectively. The fair value of the 2027 Notes was based on a combination of a discounted cash flow and Black-Scholes option-pricing model. The fair value of the 2030 Notes and 2026 Notes was based on quoted prices as of that date. The 2027 Notes may be converted at the election of the holders thereof at any time prior to maturity. The 2026 Notes and 2030 Notes are convertible at the option of the respective holders thereof if 11 Table of Contents Unity Software Inc. a conversion condition applicable to such series of Notes is triggered. During the three and six months ended June 30, 2025, none of the conversion conditions of the 2026 Notes or the 2030 notes were triggered, and the 2026 Notes and 2030 Notes were not convertible as of June 30, 2025. Any such conversion of the Notes noted above, may be satisfied at our election with either cash, shares of our common stock, or a combination of cash and shares of our common stock. The conversion rates for the Notes are subject to customary adjustments for certain events as described in the relevant indenture governing the Notes. The Notes are subject to additional terms. In connection with certain corporate events, as described in the indentures governing the Notes, we will increase the conversion rate for a holder of the applicable series of Notes who elects to convert those Notes in connection with the event. Additionally, upon the occurrence of certain corporate events and subject to certain exceptions, as described in the indenture governing the applicable series of Notes, holders of those Notes may require us to repurchase all or a portion of their notes at a price equal to 100 % of the principal amount to be repurchased, plus any accrued and unpaid interest to date. The 2026 Notes and 2030 Notes are also redeemable at our option if certain conditions are met, as described in the indentures governing the 2026 Notes and 2030 Notes respectively. As of June 30, 2025, no holders of the Notes have exercised the conversion rights, and the if-converted value of the Notes did not exceed the principal amount. Convertible Note Repurchase During the first quarter of 2025, and the first quarter of 2024, the Company repurchased in privately negotiated transactions and extinguished a portion of the 2026 Notes, with a total principal balance of $ 688 million and $ 480 million, respectively. The aggregate repurchase price for these notes was $ 642 million and $ 415 million, respectively, resulting in pre-tax gains of $ 42.7 million and $ 61.4 million, net of the write-off of unamortized issuance costs, respectively. These gains were included in Interest income and other income (expense), net, in the condensed consolidated statement of operations. Capped Call Transactions We entered into capped call transactions (the "Capped Call Transactions"), to reduce the potential dilutive effect of the 2026 Notes (the "2026 Capped Call Transactions"), and 2030 Notes (the "2030 Capped Call Transactions"), in connection with their pricing. The 2026 Capped Call Transactions, and the 2030 Capped Call Transactions, had net costs of $ 48.1 million and $ 44.4 million, respectively, with call options totaling approximately 5.6 million and 19.1 million of our common stock, and with expiration dates ranging from September 18, 2026 to November 12, 2026, and January 15, 2030 to March 13, 2030, respectively. The strike price of the 2026 Capped Call Transactions, and the 2030 Capped Call Transactions are $ 308.72 and $ 36.15 , respectively, and the cap prices are initially $ 343.02 and $ 47.74 per share, respectively, subject to adjustments in certain circumstances. The Capped Call Transactions are freestanding and are considered separately exercisable from the 2026 Notes and 2030 Notes. As of June 30, 2025, the Capped Call Transactions met the conditions for equity classification and were not in the money. 12 Table of Contents Unity Software Inc. 7. Commitments and Contingencies The following table summarizes our non-cancelable contractual commitments as of June 30, 2025 (in thousands): Total Remainder of 2025 2026‑2027 2028‑2029 Thereafter Operating leases (1) $ 127,844 $ 21,076 $ 58,795 $ 33,612 $ 14,361 Purchase commitments (2) 859,647 219,176 383,083 257,388 — Convertible note principal and interest (3) 2,297,724 10,000 1,597,724 — 690,000 Total $ 3,285,215 $ 250,252 $ 2,039,602 $ 291,000 $ 704,361 (1) Operating leases consist of obligations for real estate, including leases that are not yet commenced. (2) The substantial majority of our purchase commitments are related to agreements with our data center hosting providers. (3) Convertible notes due 2026, 2027, and 2030. See Note 6, "Borrowings," above for further discussion. We expect to meet our remaining commitments. Legal Matters In the normal course of business, we are subject to various legal matters. We accrue a liability when management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Legal costs related to such potential losses are expensed as incurred. In addition, recoveries are shown as a reduction in legal costs in the period in which they are realized. With respect to our outstanding matters, based on our current knowledge, we believe that the resolution of such matters will not, either individually or in aggregate, have a material adverse effect on our business or our condensed consolidated financial statements. However, litigation is inherently uncertain, and the outcome of these matters cannot be predicted with certainty. Accordingly, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these matters. From time to time, we may be subject to other legal proceedings and claims arising in the ordinary course of business. Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees and other parties with respect to certain matters. Indemnification may include losses from our breach of such agreements, services we provide, or third-party intellectual property infringement claims. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments may not be subject to a cap. As of June 30, 2025, there were no known events or circumstances that have resulted in a material indemnification liability to us and we did not incur material costs to defend lawsuits or settle claims related to these indemnifications. Letters of Credit We had $ 10.5 million and $ 10.2 million of secured letters of credit outstanding as of June 30, 2025 and December 31, 2024, respectively. These primarily relate to our office space leases and are fully collateralized by certificates of deposit which we record in restricted cash as other assets on our condensed consolidated balance sheets. 13 Table of Contents Unity Software Inc. 8. Stock‑Based Compensation Stock-based compensation expense is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Cost of revenue $ 9,861 $ 7,911 $ 18,973 $ 24,717 Research and development 51,051 56,908 101,645 144,646 Sales and marketing 19,208 22,282 39,169 86,253 General and administrative 21,484 28,298 40,607 125,660 Total stock-based compensation expense $ 101,604 $ 115,399 $ 200,394 $ 381,276 Included in the above expenses for the three and six months ended June 30, 2024, is $ 3 million and $ 97 million, respectively, of incremental stock-based compensation expense from modifications, primarily within general and administrative. These amounts predominately relate to the modification of awards held by the founders of ironSource Ltd. that departed in the first quarter of 2024. Stock Options A summary of our stock option, including price-vested options ("PVO"), activity is as follows: Options Outstanding Stock Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (In Years) Balance as of December 31, 2024 23,158,212 $ 21.10 4.24 Granted 206,244 $ 24.72 Exercised ( 3,443,379 ) $ 6.26 Forfeited, cancelled, or expired ( 1,235,512 ) $ 49.40 Balance as of June 30, 2025 18,685,565 $ 22.00 4.31 Restricted Stock Units A summary of our restricted stock unit ("RSU"), including price-vested unit ("PVU"), and performance-based restricted stock unit ("PSU"), activity is as follows: Unvested RSUs Number of Shares Weighted-Average Grant-Date Fair Value Unvested as of December 31, 2024 30,013,275 $ 26.03 Granted 12,887,903 $ 21.46 Vested ( 6,824,912 ) $ 29.82 Forfeited ( 4,930,230 ) $ 23.58 Unvested as of June 30, 2025 31,146,036 $ 23.70 Price-Vested Units and Price-Vested Options The vesting for each of the PVUs and PVOs is subject to the fulfillment of both a service period that extends up to four years and the achievement of a stock price hurdle during the relevant performance period that extends up to six and seven years , respectively. The fair value of each PVU and PVO award is estimated using a Monte Carlo simulation that uses assumptions determined on the date of grant. During 14 Table of Contents Unity Software Inc. the three and six months ended June 30, 2025, the price hurdle was not met by any outstanding options or units, which had not already attained them in a prior period. Performance-Based Restricted Stock Units Starting in the first quarter of 2025, we have issued PSUs to certain executives as part of their compensation. The vesting for each PSU is subject to the fulfillment of both a service period of 3 years, and the level of achievement of certain performance goals (revenue and EBITDA metrics), over three annual performance periods ("tranche"). These goals are set as a range of target outcomes, in the first quarter of each year, and can be attained at a rate between 0 % and 150 %, based on where in the range the final results fall. The fair value of each PSU is estimated separately for each tranche of the award, using the closing price of Unity's common stock on the day the performance goals are set for that tranche. The expense is the fair value of the award multiplied by the expected attainment of the related performance goals as of the balance sheet date, recognized ratably for each tranche over the period between the day the performance goal is set, and the end of the service period. The expense is adjusted each period for any changes in the expected attainment of the performance goals. Fair Value Assumptions The calculated grant-date fair value of stock options, PVUs, and PVOs granted, were estimated using the Black-Scholes option-pricing model for stock options, and a Monte Carlo stimulation for the PVUs and PVOs, with the following assumptions: Three Months Ended June 30, Six Months Ended June 30, 2024 2025 2024 Expected dividend yield — — — Risk-free interest rate 4.3 % - 4.7 % 4.1 % 4.1 % - 4.7 % Expected volatility 60.0 % - 66.5 % 69.5 % 60.0 % - 66.5 % Expected term (in years) 6.25 - 10.00 6.25 6.25 - 10.00 Fair value of underlying common stock $ 17.95 - $ 24.27 $ 24.72 $ 17.95 - $ 26.89 Employee Stock Purchase Plan The fair value of shares offered under our Employee Stock Purchase Plan ("ESPP") was determined on the grant date using the Black-Scholes option pricing model. The following table summarizes the assumptions used and the resulting grant-date fair values of our ESPP: Six Months Ended June 30, 2025 2024 Expected dividend yield — — Risk-free interest rate 4.3 % - 4.3 % 5.3 % Expected volatility 73.4 % - 73.4 % 56.0 % Expected term (in years) 0.50 0.50 Grant-date fair value per share $ 9.26 - $ 9.26 $ 9.11 Additional information related to the ESPP is provided below (in thousands, except per share amounts): Six Months Ended June 30, 2025 2024 Shares issued under the ESPP 693,873 551,146 Weighted-average price per share issued $ 14.19 $ 24.92 15 Table of Contents Unity Software Inc. 9. Income Taxes Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, we update the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to volatility due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in how we do business, and tax law developments. Our effective tax rate for the three and six months ended June 30, 2025 differs from the U.S. federal statutory tax rate of 21% primarily due to the need to record a valuation allowance on U.S. losses and to a lesser extent tax expense on foreign earnings taxed at different rates. Our effective tax rate for the three and six months ended June 30, 2024 differed from the U.S. federal statutory tax rate of 21% primarily due to the need to record a valuation allowance in the U.S. on losses, a tax benefit on foreign losses in connection with employee separation costs, and to a lesser extent, tax expense on foreign earnings taxed at different rates. In addition, during the first quarter of 2024, the Company restructured its tax operations which resulted in a reduction to the U.S. valuation allowance. The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We regularly assess the ability to realize our deferred tax assets and establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. In performing this assessment with respect to each jurisdiction, we review all available positive and negative evidence. Primarily due to our history of losses, we believe that it is more likely than not that the deferred tax assets of our U.S. federal, certain U.S. states, Denmark, U.K., and other non-U.S. jurisdictions will not be realized and we have maintained a full valuation allowance against such deferred tax assets. As of June 30, 2025, we had $ 182.5 million of gross unrecognized tax benefits, of which $ 33.9 million would impact the effective tax rate, if recognized. It is reasonably possible that the amount of unrecognized tax benefits as of June 30, 2025 could increase or decrease significantly as the timing of the resolution, settlement, and closure of audits is highly uncertain. We believe that we have adequately provided for any reasonably foreseeable outcome related to our tax audits and that any settlement will not have a material impact on our financial condition and operating results at this time. 10. Net Loss per Share of Common Stock Basic and diluted net loss per share is the same for all periods presented because the effects of potentially dilutive items were antidilutive given our net loss in each period. The following table presents potentially dilutive common stock excluded from the computation of diluted net loss per share (in thousands) because the impact of including them would have been antidilutive: As of June 30, 2025 2024 Convertible notes 41,348 24,488 Stock options and PVOs 18,686 28,449 Unvested RSUs, PVUs, and PSUs 31,146 28,244 11. Segment Information We have one reportable segment, software solutions. See "Revenue Recognition" in Note 1 of our 2024 Annual Report on Form 10-K, for detailed information regarding our products and services. Our chief operating decision maker is the chief executive officer, who on a consolidated basis, assess the performance of, drives improvements in, and decides how to allocate resources in the reportable segment, based on multiple measures of performance including consolidated net income, 16 Table of Contents Unity Software Inc. adjusted EBITDA, adjusted gross margin, and adjusted EPS. As such, consolidated net income, which is reported and reconciled with all significant segment expenses on our consolidated statement of operations, is the measure that is most consistent with GAAP, while adjusted EBITDA, adjusted gross margin, and adjusted EPS are additional measures of our segment profitability. The measure of segment assets is reported on the balance sheet as total consolidated assets. We do not have material intra-entity sales or transfers. 17 Table of Contents Unity Software Inc.