Unity Software Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Please read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition, or results of operations. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K filed with the SEC on February 21, 2025 and "Part II, Item 1A. Risk Factors" included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments. See the section titled "Note Regarding Forward-Looking Statements and Risk Factor Summary" in this report. Overview Unity offers a suite of tools to create, market, and grow games and interactive experiences across all major platforms from mobile, PC, and console, to extended reality (XR). Our platform consists of two complementary sets of solutions: Create Solutions and Grow Solutions. Starting in the fourth quarter of 2023, we began to reset our product and service offerings to focus on our core businesses, which we refer to as our "Strategic Portfolio": the Unity Engine and related consumption services, and Monetization. Recent Developments in Our Business In the six months ended June 30, 2025, we had reductions to our workforce and our office footprint, that resulted in approximately $20 million in employee separation costs, and $11 million of non-employee charges associated with these reductions. We are continuing to evaluate our facility needs and expect more changes in the remainder of 2025. For additional details, refer to the section titled "Risk Factors." Key Metrics As further discussed in Item 2 of Part I, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K, we monitor the following key metrics to help us evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions. We have revised and restated these metrics to include inputs from our Strategic Portfolio only. Customers Contributing More Than $100,000 of Revenue We had 1,270 and 1,254 customers contributing more than $100,000 of revenue in the trailing 12 months as of June 30, 2025 and 2024, respectively. The year over year increase was largely a result of our subscriptions growth. While these customers represented the substantial majority of revenue for the six months ended June 30, 2025 and 2024, respectively, no one customer accounted for more than 10% of our revenue for either period. Dollar-Based Net Expansion Rate Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with our Create and Grow Solutions customers and to increase their use of our platform. We track our performance by measuring our dollar-based net expansion rate, which compares our Create and Grow Solutions revenue, excluding Strategic Partnerships and Supersonic, from the same set of customers across comparable periods, calculated on a trailing 12-month basis. 18 Table of Contents Unity Software Inc. As of June 30, 2025 June 30, 2024 Dollar-based net expansion rate 100 % 96 % Our dollar-based net expansion rate as of June 30, 2025 and 2024 was driven primarily by decreases in Grow Solutions revenue, due to competition in the advertising market, offset by growth in subscriptions revenue. The increase in dollar-based net expansion rate, compared to the comparable prior year period, is attributable to reduced declines in Grow Solutions revenue, as noted above. The chart below illustrates that our dollar-based net expansion rate has been increasing over the last year. 19 Table of Contents Unity Software Inc. Results of Operations The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands): Three Months Ended June 30, Six Months Ended 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) The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenue 100 % 100 % 100 % 100 % Cost of revenue 26 24 26 28 Gross profit 74 76 74 72 Operating expenses Research and development 48 47 50 54 Sales and marketing 37 38 37 44 General and administrative 16 20 15 29 Total operating expenses 101 105 102 127 Loss from operations (27) (29) (28) (55) Interest expense (1) (1) (1) (1) Interest income and other income (expense), net 4 2 8 9 Loss before income taxes (24) (28) (21) (47) Provision for (benefit from) Income taxes — — — (1) Net loss (24) % (28) % (21) % (46) % Revenue Create Solutions We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and consumption services. Our subscriptions provide customers access to technologies that allow them to edit, run, and iterate interactive, RT3D and 2D experiences that can be created once and deployed to a variety of platforms. Enhanced support services are provided to our enterprise customers and are generally sold separately from the Create 20 Table of Contents Unity Software Inc. Solutions subscriptions. Professional services are provided to our customers and include consulting, platform integration, training, and custom application and workflow development. Cloud and hosting services are provided to our customers to simplify and enhance the way our users access and harness our solutions. Grow Solutions We generate Grow Solutions revenue primarily through our monetization solutions and game publishing services. Our monetization solutions allow publishers, original equipment manufacturers, and mobile carriers to sell available advertising inventory on their mobile applications or hardware devices to advertisers for in-application or on-device placements. Our revenue represents the amount we retain from the transaction we are facilitating through our Unified Auction and mediation platform. Our game publishing services provide game developers with the infrastructure and expertise to launch their mobile games and manage their growth; this is achieved through marketability testing tools, live games management tools and game design support, and optimizing the implementation of the customer's commercial model. Through these publishing services, we generate revenue from in-app advertising in published games and in some cases, in-app purchase revenue. Our total revenue is summarized as follows (in thousands): Three Months Ended Six Months Ended June 30, 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 Included in revenue in the six months ended June 30, 2025 and 2024, are approximately $20 million and $58 million, respectively, of revenue associated with non-strategic portfolio, primarily in Create Solutions. We expect that these amounts will decline further through the remainder of 2025. Total revenue decreased in the three and six months ended June 30, 2025, compared to the comparable prior year periods, primarily due to a decrease in Grow Solutions revenue driven by changes in customer demand, competition, and resource allocation decisions. To improve the performance of Grow Solutions, in the first and second quarter of 2025, we migrated one of our ad networks (the "Unity Ad Network") to our new AI Platform, which we call "Unity Vector". These changes contributed to the Unity Ad Network growing 15% from the three months ended March 31, 2025 to the three months ended June 30, 2025, and now represents 49% of total Grow Solutions revenue for the three months ended June 30, 2025. The decrease in total revenue for the three and six months ended June 30, 2025, was further impacted by changes in Create Solutions revenue, including decreases in professional services revenue, and decreases in consumption services revenue, which were offset by an increase from the sale of a term license for approximately $12 million in the second quarter of 2025, and increases in subscription revenue. Cost of Revenue, Gross Profit, and Gross Margin Cost of revenue consists primarily of personnel costs (including salaries, benefits, and stock-based compensation) for employees and subcontractors associated with our product support and professional services organizations, hosting expenses, the amortization of intangible assets, and direct costs associated with our advertising offerings. Gross profit, or revenue less cost of revenue, has been and will continue to be affected by various factors, including our product mix, the costs associated with third-party hosting services and the extent to which we expand and drive efficiencies in our hosting costs, professional services, and customer support organizations. We expect our gross profit to increase in absolute dollars in the long term but fluctuate in 21 Table of Contents Unity Software Inc. the short term as we stabilize our business following our reset efforts. We expect our gross profit as a percentage of revenue, or gross margin, to fluctuate from period to period. Cost of revenue for the three months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to an increase in personnel costs, driven by the timing of merit increases in each year, and hosting expenses to operate our advertising networks. Cost of revenue for the six months ended June 30, 2025 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs, driven by our reductions in headcount. Operating Expenses Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The most significant component of our operating expenses is personnel-related costs, including salaries and wages, sales commissions, bonuses, benefits, stock-based compensation, and payroll taxes. In January 2024, we committed to a plan to eliminate approximately 25% of our workforce, and we mutually agreed to the departure of the founders of ironSource Ltd. Following these announcements and substantially in the first quarter of 2024, we incurred incremental employee separation costs of approximately $201 million in the six months ended June 30, 2024, largely driven by the acceleration and modification of equity awards, including $15 million within cost of revenue, $44 million within research and development expense, $52 million within sales and marketing expense, and $90 million within general and administrative expense. In addition, we incurred approximately $38 million of non-employee charges associated with this restructuring in 2024, largely within research and development expense. Further, in the first quarter of 2025 we had additional workforce reductions. In the six months ended June 30, 2025, we incurred incremental employee separation costs related to these actions of approximately $20 million, primarily within research and development, and sales and marketing. In addition, we incurred approximately $11 million of non-employee charges associated with this restructuring in 2025. Research and Development Research and development expenses primarily consist of personnel-related costs for the design and development of our platform, hosting expenses, and amortization expenses related to intangible assets. We expect our research and development expenses to increase in absolute dollars in the long term, as we expand our teams to develop new solutions, expand features and functionality with existing solutions, and enter new markets, but fluctuate in the short term as we migrate traffic to Unity Vector. We expect research and development expenses to fluctuate as a percentage of revenue from period to period. Research and development expense for the three months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to an increase in personnel costs driven by increased costs to attract and retain talent. Research and development expense for the six months ended June 30, 2025 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs driven by our reductions in headcount. Sales and Marketing Our sales and marketing expenses consist primarily of personnel-related costs, amortization expenses related to intangible assets, and advertising and marketing programs, including user acquisition costs and digital account-based marketing, user events such as developer-centric conferences and our annual Unite user conferences. We expect that our sales and marketing expense will increase in absolute dollars in the long term, as we increase our account-based sales and marketing efforts, direct marketing and community outreach activities, invest in additional tools and technologies, and continue to build brand awareness. We expect sales and marketing expenses to fluctuate as a percentage of revenue from period to period. 22 Table of Contents Unity Software Inc. Sales and marketing expense for the three and six months ended June 30, 2025 decreased, compared to the comparable prior year periods, primarily due to a decrease in personnel costs, driven by our reductions in headcount. General and Administrative Our general and administrative expenses primarily consist of personnel-related costs for finance, legal, human resources, IT and administrative employees; allocated overhead, and professional fees for external legal, accounting, and other professional services. We expect that our general and administrative expenses will increase in absolute dollars in the long term, as we scale to support the growth of our business. We expect general and administrative expenses to fluctuate as a percentage of revenue from period to period. General and administrative expense for the three and six months ended June 30, 2025 decreased, compared to the comparable prior year periods, primarily due to decreases in personnel-related costs and in impairments of operating lease assets, both driven by incremental employee separation costs and non-employee charges from restructuring in 2024. Interest Expense Interest expense consists primarily of interest expense associated with our convertible debt and amortization of debt issuance costs. Interest expense for the three and six months ended June 30, 2025 increased, compared to the comparable prior year periods, due to the amortization of new debt issuance costs, from the issuance of the 2030 notes, partially offset by a reduction in the amortization of debt issuance costs, driven by the repurchase of the 2026 notes. Interest Income and Other Income (Expense), Net Interest income and other income (expense), net, consists primarily of gains on the repurchase of convertible debt, interest income earned on our cash and cash equivalents, and foreign currency gains and losses. As we have expanded our global operations, our exposure to fluctuations in foreign currencies has increased, and we expect this to continue. Interest income and other income (expense), net, for the three months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to gains from foreign exchange. Interest income and other income (expense), net, for the six months ended June 30, 2025 decreased, compared to the comparable prior year period, primarily due to changes in the amount of gain recognized from the repurchase of convertible debt. In the first quarter of 2024, we recognized $61.4 million of gain on repurchase of convertible debt, compared to $42.7 million in the first quarter of 2025. Provision for (benefit from) Income taxes Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign jurisdictions where we conduct business. We have a valuation allowance against certain of our deferred tax assets, including net operating loss ("NOL") carryforwards and tax credits related primarily to research and development. Our overall effective income tax rate in future periods may be affected by the geographic mix of earnings in the countries in which we operate. Our future effective tax rate may also be affected by changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles in the jurisdictions in which we conduct business. See Note 9, "Income Taxes," of the Notes to Condensed Consolidated Financial Statements. Provision for income taxes for the three and six months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to the tax benefit from restructuring efforts undertaken in the first quarter of 2024 that enhanced our ability to offset deferred tax liabilities in the U.S. in future periods, thereby partially reducing the need for a valuation allowance. On July 4, 2025, the United States enacted new tax reform legislation. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and 23 Table of Contents Unity Software Inc. development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. As a result of the enactment of the legislation, the Company expects a decrease in the tax expense during the third and fourth quarters of 2025. The Company continues to evaluate the impact the new legislation will have on the Consolidated Financial Statements. While this assessment is ongoing, the Company does not expect the new legislation to have a material impact on the Consolidated Financial Statements. Non-GAAP Financial Measures To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe the following non-GAAP measures are useful in evaluating our operating performance. We are presenting these non-GAAP financial measures because we believe, when taken collectively, they may be helpful to investors because they provide consistency and comparability with past financial performance. However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for our consolidated financial statements presented in accordance with GAAP. Adjusted Gross Profit, Adjusted EBITDA, and Adjusted EPS We define adjusted gross profit as GAAP gross profit excluding expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, and restructurings and reorganizations. We define adjusted gross margin as adjusted gross profit as a percentage of revenue. We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and reorganizations, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses. We define adjusted EPS as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and reorganizations, and the income tax impact of the preceding adjustments (cumulatively "adjusted net income"), increased by the tax effected impacts from any relevant dilutive securities, divided by the diluted weighted-average outstanding shares. The effective tax rate used in calculating adjusted EPS is estimated for each period, based on the net income or loss adjusted for the items noted above, and may differ from the effective rate used in our financial statements. Shares of common stock that are excluded in our calculation of GAAP diluted net loss per share due to their antidilutive impact on such calculations, are included in the diluted weighted average outstanding shares used in our calculation of adjusted EPS, to the extent they have a dilutive impact on adjusted EPS given the adjusted net income in each period. We use adjusted gross profit, adjusted EBITDA, and adjusted EPS, in conjunction with traditional GAAP measures to evaluate our financial performance. We believe that adjusted gross profit, adjusted EBITDA, and adjusted EPS provide our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as these metrics exclude expenses that we do not consider to be indicative of our overall operating performance. 24 Table of Contents Unity Software Inc. The following table presents a reconciliation of our adjusted gross profit to our GAAP gross profit, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Three Months Ended June 30, 2025 2024 GAAP gross profit $ 326,733 $ 340,384 Add: Stock-based compensation expense 9,861 7,911 Amortization of intangible assets expense 26,997 26,997 Depreciation expense 1,766 2,232 Restructuring and reorganization costs 275 (253) Adjusted gross profit $ 365,632 $ 377,271 GAAP gross margin 74 % 76 % Adjusted gross margin 83 % 84 % The following table presents a reconciliation of our adjusted EBITDA to net loss, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Three Months Ended June 30, 2025 2024 GAAP net loss $ (107,365) $ (125,738) Stock-based compensation expense 101,435 113,766 Amortization of intangible assets expense 86,218 88,432 Depreciation expense 10,710 12,977 Restructuring and reorganization costs 10,886 27,714 Interest expense 6,030 5,829 Interest income and other income (expense), net (19,837) (10,457) Provision for Income taxes 2,420 946 Adjusted EBITDA $ 90,497 $ 113,469 25 Table of Contents Unity Software Inc. The following table presents a reconciliation of adjusted EPS to diluted net loss per share attributable to Unity Software Inc., the most directly comparable measures as determined in accordance with GAAP, for the periods presented (in thousands): Three Months Ended June 30, 2025 2024 GAAP net loss $ (107,365) $ (125,738) Stock-based compensation expense 101,435 113,766 Amortization of intangible assets expense 86,218 88,432 Depreciation expense 10,710 12,977 Restructuring and reorganization costs 10,886 27,714 Income tax impact of adjusting items (20,527) (25,803) Adjusted net income used for calculation of adjusted EPS, before impact of dilutive instruments $ 81,357 $ 91,348 Increase from forgone financing costs on dilutive convertible notes, net of tax 789 4,509 Adjusted net income used for calculation of adjusted EPS, including impact of dilutive instruments $ 82,146 $ 95,857 Weighted-average common shares used in GAAP diluted net loss per share attributable to Unity Software Inc. 417,566 392,537 Convertible notes 20,896 24,486 Stock options and PVOs 5,385 11,562 Unvested RSUs, PVUs, and PSUs 4,572 3,611 ESPP 4 334 Non-GAAP weighted-average common shares used in adjusted EPS 448,423 432,530 GAAP diluted net loss per share attributable to Unity Software Inc. $ (0.26) $ (0.32) Total impact on diluted net loss per share attributable to Unity Software Inc. from non-GAAP adjustments $ 0.45 $ 0.55 Total impact on diluted net loss per share attributable to Unity Software Inc. from antidilutive common stock now included $ (0.01) $ (0.01) Adjusted EPS $ 0.18 $ 0.22 Free Cash Flow We define free cash flow as net cash provided by operating activities less cash used for purchases of property and equipment. We believe that free cash flow is a useful indicator of liquidity as it measures our ability to generate cash, or our need to access additional sources of cash, to fund operations and investments. 26 Table of Contents Unity Software Inc. The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Six Months Ended June 30, 2025 2024 Net cash provided by operating activities $ 146,122 $ 81,003 Less: Purchases of property and equipment (12,164) (15,956) Free cash flow $ 133,958 $ 65,047 Net cash used in investing activities $ (14,164) $ (16,316) Net cash provided by (used in) financing activities $ 22,031 $ (377,697) Liquidity and Capital Resources As of June 30, 2025, our principal sources of liquidity were cash and cash equivalents totaling $1.7 billion, which were primarily held for working capital purposes. Our cash equivalents are invested primarily in time deposits and in government money market funds. Our material cash requirements from known contractual and other obligations consist of our convertible notes, obligations under operating leases for office space, and contractual obligations for hosting services to support our business operations. See Part I, Item I, Note 7 — "Commitments and Contingencies" for additional discussion of our principal contractual commitments. In the first quarter of 2025 we issued $690 million in aggregate principal amount of the 2030 Notes, the proceeds of which were used to fund repurchases of outstanding 2026 Notes. We previously issued $1.0 billion in aggregate principal amount of the 2027 Notes. We also previously issued $1.7 billion in aggregate principal amount of the 2026 Notes in November 2021, of which $688 million in aggregate principal amount was repurchased in first quarter 2025 for $642 million, and $480 million in aggregate principal amount was repurchased in March 2024 for $415 million. See Part I, Item I, Note 6, "Borrowings" for additional discussion of the Notes. Since our inception, we have generated losses from our operations as reflected in our accumulated deficit of $3.9 billion as of June 30, 2025. We expect to continue to incur operating losses on a GAAP basis for the foreseeable future due to the investments we will continue to make in research and development, sales and marketing, and general and administrative. As a result, we may require additional capital to execute our strategic initiatives to grow our business. We believe our existing sources of liquidity will be sufficient to meet our working capital and capital expenditures for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and potential future equity or debt transactions. Our future capital requirements, however, will depend on many factors, including our growth rate; the timing and extent of spending to support our research and development efforts; capital expenditures to build out new facilities and purchase hardware and software; the expansion of sales and marketing activities; and our continued need to invest in our IT infrastructure to support our growth. In addition, we may enter into additional strategic partnerships as well as agreements to acquire or invest in complementary offerings, teams and technologies, including intellectual property rights, which could increase our cash requirements. As a result of these and other factors, we may choose or be required to seek additional equity or debt financing sooner than we currently anticipate. In addition, depending on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors, we may also 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. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all, including as a 27 Table of Contents Unity Software Inc. result of macroeconomic conditions such as high interest rates, volatility in the capital markets and liquidity concerns at, or failures of, banks and other financial institutions. If we are unable to raise additional capital when required, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected. Our changes in cash flows were as follows (in thousands): Six Months Ended June 30, 2025 2024 Net cash provided by operating activities $ 146,122 $ 81,003 Net cash used in investing activities (14,164) (16,316) 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) Net change in cash, cash equivalents, and restricted cash $ 173,626 $ (322,470) Cash Provided by Operating Activities During the six months ended June 30, 2025, net cash provided by operating activities was primarily due to a decrease in our net loss, adjusted for certain non-cash items, which include depreciation and amortization, stock-based compensation, gain on convertible notes, impairments, and other, offset by a decrease in operating assets and liabilities. Our cash flows can fluctuate from period to period due to revenue seasonality, timing of billings, collections, and publisher payments, and historical cash flows are not necessarily indicative of our results in any future period. Cash Used in Investing Activities During the six months ended June 30, 2025, net cash used in investing activities consisted primarily of purchases of property and equipment and purchases of non-marketable investments. Cash Provided by Financing Activities During the six months ended June 30, 2025, net cash provided by financing activities consisted of proceeds from issuance of convertible notes, and the issuance of common stock under our employee equity plans, offset by repayments of convertible notes and the purchase of capped calls. Critical Accounting Policies and Estimates Management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. These principles require us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. Our estimates are based on our historical experience and on various other assumptions that we believe are reasonable under the circumstances. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. There have been no material changes to our critical accounting policies and estimates from those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 21, 2025. Item 3. Quantitative and Qualitative Disclosures About Market Risk Our assessment of our exposures to market risk has not changed materially since the presentation set forth in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 21, 2025. 28 Table of Contents Unity Software Inc.