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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| For the transition period from _______ to _______ |
| Commission File Number: 001-39497 |

| UNITY SOFTWARE INC. |
(Exact name of registrant as specified in its charter)

Delaware |  | 27-0334803
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
| 116 New Montgomery Street |
| San Francisco, California 94105-3607 |
| (Address, including zip code, of principal executive offices) |
| (415) 638-9950 |
| (Registrant's telephone number, including area code) |

Securities registered pursuant to Section 12(b) of the Act:
Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common stock, $0.000005 par value |  | U |  | The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer | ☒ |  | Accelerated filer | ☐
Non‑accelerated filer | ☐ |  | Smaller reporting company | ☐
|  |  | Emerging growth company | ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No x

As of April 30, 2025, there were 415,694,628 shares of the registrant's common stock outstanding.

UNITY SOFTWARE INC.
FORM 10‑Q
For the Quarter Ended March 31, 2025
TABLE OF CONTENTS

|  | Page
PART I—FINANCIAL INFORMATION |
Item 1. | Financial Statements (Unaudited) | 1
| Condensed Consolidated Balance Sheets | 1
| Condensed Consolidated Statements of Operations | 2
| Condensed Consolidated Statements of Comprehensive Loss | 3
| Condensed Consolidated Statements of Stockholders' Equity | 4
| Condensed Consolidated Statements of Cash Flows | 5
| Notes to Condensed Consolidated Financial Statements | 6
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 16
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26
Item 4. | Controls and Procedures | 26
PART II—OTHER INFORMATION |
Item 1. | Legal Proceedings | 27
Item 1A. | Risk Factors | 28
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 31
Item 3. | Defaults Upon Senior Securities | 31
Item 4. | Mine Safety Disclosures | 31
Item 5. | Other Information | 32
Item 6. | Exhibits | 33
SIGNATURES | 34

NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10‑Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "aim," "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "toward," "will," "would," or the negative of these words or other similar terms or expressions.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10‑Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. Readers are cautioned that these forward‑looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified and discussed in greater detail in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K filed with the SEC on February 21, 2025 and below, under "Part II, Item 1A. Risk Factors."
The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10‑Q. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10‑Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10‑Q or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
Additional Information
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to "we," "us," "our," "our company," "Unity," and "Unity Technologies" refer to Unity Software Inc. and its consolidated subsidiaries. The Unity design logos, "Unity" and our other registered or common law trademarks, service marks, or trade names appearing in this Quarterly Report on Form 10-Q are the property of Unity Software Inc. or its affiliates.
Investors and others should note that we may announce material business and financial information using our investor relations website (www.investors.unity.com), our filings with the Securities and Exchange Commission, press releases, public conference calls, and public webcasts as means of complying with our disclosure obligations under Regulation FD. We encourage investors and others interested in our company to review the information that we make available.

Table of Contents |  | Unity Software Inc.

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| As of
| March 31, 2025 |  | December 31, 2024
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 1,541,170 |  |  | $ | 1,517,672 |
Accounts receivable, net | 552,958 |  |  | 573,884 |
Prepaid expenses and other | 144,514 |  |  | 133,795 |
Total current assets | 2,238,642 |  |  | 2,225,351 |
Property and equipment, net | 89,972 |  |  | 98,819 |
Goodwill | 3,166,304 |  |  | 3,166,304 |
Intangible assets, net | 980,584 |  |  | 1,066,235 |
Other assets | 170,453 |  |  | 180,698 |
Total assets | $ | 6,645,955 |  |  | $ | 6,737,407 |
Liabilities and stockholders' equity |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 16,538 |  |  | $ | 13,948 |
Accrued expenses and other | 273,444 |  |  | 294,951 |
Publisher payables | 339,129 |  |  | 394,284 |
Deferred revenue | 188,490 |  |  | 186,304 |
Total current liabilities | 817,601 |  |  | 889,487 |
Convertible notes | 2,232,143 |  |  | 2,238,922 |
Long-term deferred revenue | 14,710 |  |  | 16,846 |
Other long-term liabilities | 154,863 |  |  | 165,004 |
Total liabilities | 3,219,317 |  |  | 3,310,259 |
Commitments and Contingencies (Note 7) |  |  |
Redeemable noncontrolling interests | 234,740 |  |  | 230,627 |
Stockholders' equity: |  |  |
Common stock, $0.000005 par value: |  |  |
Authorized shares - 1,000,000 and 1,000,000 |  |  |
Issued and outstanding shares - 415,406 and 409,393 | 2 |  |  | 2 |
Additional paid-in capital | 7,008,134 |  |  | 6,936,038 |
Accumulated other comprehensive loss | (8,501) |  |  | (9,425) |
Accumulated deficit | (3,813,586) |  |  | (3,735,944) |
Total Unity Software Inc. stockholders' equity | 3,186,049 |  |  | 3,190,671 |
Noncontrolling interest | 5,849 |  |  | 5,850 |
Total stockholders' equity | 3,191,898 |  |  | 3,196,521 |
Total liabilities and stockholders' equity | $ | 6,645,955 |  |  | $ | 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 |  |
| March 31, |  |
| 2025 |  | 2024 |  |  |  |
Revenue | $ | 435,000 |  |  | $ | 460,380 |  |  |  |  |
Cost of revenue | 113,957 |  |  | 144,387 |  |  |  |  |
Gross profit | 321,043 |  |  | 315,993 |  |  |  |  |
Operating expenses |  |  |  |  |  |  |
Research and development | 220,625 |  |  | 282,728 |  |  |  |  |
Sales and marketing | 162,013 |  |  | 230,625 |  |  |  |  |
General and administrative | 66,340 |  |  | 177,569 |  |  |  |  |
Total operating expenses | 448,978 |  |  | 690,922 |  |  |  |  |
Loss from operations | (127,935) |  |  | (374,929) |  |  |  |  |
Interest expense | (5,891) |  |  | (6,035) |  |  |  |  |
Interest income and other income (expense), net | 58,111 |  |  | 76,643 |  |  |  |  |
Loss before income taxes | (75,715) |  |  | (304,321) |  |  |  |  |
Provision for (benefit from) Income taxes | 2,192 |  |  | (12,843) |  |  |  |  |
Net loss | (77,907) |  |  | (291,478) |  |  |  |  |
Net loss attributable to noncontrolling interest and redeemable noncontrolling interests | (265) |  |  | (404) |  |  |  |  |
Net loss attributable to Unity Software Inc. | $ | (77,642) |  |  | $ | (291,074) |  |  |  |  |
Basic and diluted net loss per share attributable to Unity Software Inc. | $ | (0.19) |  |  | $ | (0.75) |  |  |  |  |
Weighted-average shares used in computation of basic and diluted net loss per share | 411,852 |  |  | 387,151 |  |  |  |  |

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 |  |
| March 31, |  |
| 2025 |  | 2024 |  |  |  |
Net loss | $ | (77,907) |  |  | $ | (291,478) |  |  |  |  |
Other comprehensive income (loss), net of taxes: |  |  |  |  |  |  |
Change in foreign currency translation adjustment | 1,178 |  |  | (3,461) |  |  |  |  |
Other comprehensive income (loss) | 1,178 |  |  | (3,461) |  |  |  |  |
Comprehensive loss | (76,729) |  |  | (294,939) |  |  |  |  |
Net loss attributable to noncontrolling interest and redeemable noncontrolling interests | (265) |  |  | (404) |  |  |  |  |
Foreign currency translation attributable to noncontrolling interest and redeemable noncontrolling interests | 254 |  |  | (710) |  |  |  |  |
Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interests | (11) |  |  | (1,114) |  |  |  |  |
Comprehensive loss attributable to Unity Software Inc. | $ | (76,718) |  |  | $ | (293,825) |  |  |  |  |

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 March 31, 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 |  |  |  |  | 2,966,829 |  |  | — |  |  | 21,611 |  |  | — |  |  | — |  |  |  |  | 21,611 |  |  | — |  |  | 21,611 |
Issuance of common stock for settlement of RSUs |  |  |  |  | 3,047,139 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |
Purchase of capped calls |  |  |  |  | — |  |  | — |  |  | (44,436) |  |  | — |  |  | — |  |  |  |  | (44,436) |  |  | — |  |  | (44,436) |
Stock‑based compensation expense |  |  |  |  | — |  |  | — |  |  | 99,044 |  |  | — |  |  | — |  |  |  |  | 99,044 |  |  | — |  |  | 99,044 |
Net loss |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (77,642) |  |  |  |  | (77,642) |  |  | (18) |  |  | (77,660) |
Adjustments to redeemable noncontrolling interest |  |  |  |  | — |  |  | — |  |  | (4,123) |  |  | — |  |  | — |  |  |  |  | (4,123) |  |  | — |  |  | (4,123) |
Other comprehensive income |  |  |  |  | — |  |  | — |  |  | — |  |  | 924 |  |  | — |  |  |  |  | 924 |  |  | 17 |  |  | 941 |
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 |
|  |  |  |  | Three Months Ended March 31, 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 |  |  |  |  | 2,511,920 |  |  | — |  |  | 25,997 |  |  | — |  |  | — |  |  |  |  | 25,997 |  |  | — |  |  | 25,997 |
Issuance of common stock for settlement of RSUs |  |  |  |  | 3,013,449 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |
Stock‑based compensation expense |  |  |  |  | — |  |  | — |  |  | 269,288 |  |  | — |  |  | — |  |  |  |  | 269,288 |  |  | — |  |  | 269,288 |
Net loss |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (291,074) |  |  |  |  | (291,074) |  |  | (28) |  |  | (291,102) |
Adjustments to redeemable noncontrolling interest |  |  |  |  | — |  |  | — |  |  | 23 |  |  | — |  |  | — |  |  |  |  | 23 |  |  | — |  |  | 23 |
Other comprehensive loss |  |  |  |  | — |  |  | — |  |  | — |  |  | (2,751) |  |  | — |  |  |  |  | (2,751) |  |  | (48) |  |  | (2,799) |
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 |

.
(1) Excludes redeemable noncontrolling interests.
See accompanying Notes to Condensed Consolidated Financial Statements.
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UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31,
| 2025 |  | 2024
Operating activities |  |  |
Net loss | $ | (77,907) |  |  | $ | (291,478) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |  |
Depreciation and amortization | 96,217 |  |  | 101,810 |
Stock-based compensation expense | 98,790 |  |  | 265,877 |
Gain on repayment of convertible note | (42,744) |  |  | (61,371) |
Impairment of property and equipment | 3,470 |  |  | 13,598 |
Other | (218) |  |  | 2,918 |
Changes in assets and liabilities, net of effects of acquisitions: |  |  |
Accounts receivable, net | 21,022 |  |  | (9,740) |
Prepaid expenses and other | (10,602) |  |  | (16,779) |
Other assets | 10,023 |  |  | (2,399) |
Accounts payable | 2,198 |  |  | 5,273 |
Accrued expenses and other | (21,029) |  |  | (4,269) |
Publisher payables | (55,155) |  |  | 25,558 |
Other long-term liabilities | (10,919) |  |  | (23,584) |
Deferred revenue | (120) |  |  | (12,787) |
Net cash provided by (used in) operating activities | 13,026 |  |  | (7,373) |
Investing activities |  |  |
Purchases of property and equipment | (5,718) |  |  | (7,190) |
Net cash used in investing activities | (5,718) |  |  | (7,190) |
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 | 21,611 |  |  | 25,998 |
Net cash provided by (used in) financing activities | 12,248 |  |  | (389,001) |
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | 4,197 |  |  | (6,202) |
Increase (decrease) in cash, cash equivalents, and restricted cash | 23,753 |  |  | (409,766) |
Cash, cash equivalents, and restricted cash, beginning of period | 1,527,881 |  |  | 1,604,267 |
Cash, cash equivalents, and restricted cash, end of period | $ | 1,551,634 |  |  | $ | 1,194,501 |
Supplemental disclosure of cash flow information: |  |  |
Cash paid for (refunded from) income taxes, net | $ | (1,736) |  |  | $ | 11,041 |
Cash paid for operating leases | $ | 10,433 |  |  | $ | 13,540 |
Supplemental disclosures of non‑cash investing and financing activities: |  |  |
Assets acquired under operating lease | $ | 22 |  |  | $ | 9,273 |

See accompanying Notes to Condensed Consolidated Financial Statements.
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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.
Employee Separation and Restructuring Costs
In the three months ended March 31, 2025, we incurred incremental employee separation costs of approximately $14 million, primarily within sales and marketing and research and development. In the three months ended March 31, 2024, we incurred incremental employee separation costs of approximately $193 million, which included $126 million of incremental stock-based compensation. Of the incremental employee separation costs we incurred in the three months ended March 31, 2024, $15 million are within cost of revenue, $43 million are within research and development, $47 million are within sales and marketing, and $88 million are within general and administrative. Additionally, for the three months ended March 31, 2025 and 2024, we incurred $6 million and $19 million, respectively, of other restructuring costs, primarily related to office closures.
2. Revenue
The following table presents our revenue disaggregated by source, which also have similar economic characteristics (in thousands):

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
Create Solutions | 150,378 |  |  | 163,670 |  |  |  |  |
Grow Solutions | 284,622 |  |  | 296,710 |  |  |  |  |
Total revenue | $ | 435,000 |  |  | $ | 460,380 |  |  |  |  |

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The following table presents our revenue disaggregated by geography, based on the invoice address of our customers (in thousands):

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
United States | $ | 126,288 |  |  | $ | 139,119 |  |  |  |  |
Greater China (1) | 65,202 |  |  | 59,690 |  |  |  |  |
EMEA (2) | 152,500 |  |  | 166,770 |  |  |  |  |
APAC (3) | 80,081 |  |  | 84,036 |  |  |  |  |
Other Americas (4) | 10,929 |  |  | 10,765 |  |  |  |  |
Total revenue | $ | 435,000 |  |  | $ | 460,380 |  |  |  |  |

(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 March 31, 2025 and December 31, 2024, the allowance for uncollectible amounts was $15.6 million and $17.3 million, respectively. For the three months ended March 31, 2025 and 2024, the provision for uncollectible amounts was $0.5 million and $1.8 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 March 31, 2025, capitalized commissions, net of amortization, included in prepaid expenses and other and other assets were $6.2 million and $4.5 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 months ended March 31, 2025, we recorded amortization costs of $1.9 million in sales and marketing expenses, as compared to $2.4 million during the three months ended March 31, 2024. We did not incur any impairment losses for the three months ended March 31, 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 $20.3 million and $20.5 million as of March 31, 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 March 31, 2025 and December 31, 2024.
Contract liabilities (deferred revenue) relate to payments received in advance of performance under the contract. Revenue recognized during the three months ended March 31, 2025 that was included in the deferred revenue balances at January 1, 2025 was $78.7 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 March 31, 2025, were $309 million and relate primarily to Create Solutions subscriptions, Enterprise Support, and
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Strategic Partnerships. These commitments generally extend over the next one to five years and we expect to recognize approximately $166 million or 54% 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):

|  |  |  |  |  |  | March 31, 2025 |  | December 31, 2024
|  |  |  |  |  |  | Fair Value (1)
Cash |  |  |  |  |  |  | $ | 932,674 |  |  | $ | 995,802 |
Level 1: |  |  |  |  |  |  |  |  |
Restricted cash and cash equivalents: |  |  |  |  |  |  |  |  |
Restricted cash |  |  |  |  |  |  | $ | 10,464 |  |  | $ | 10,209 |
Money market funds |  |  |  |  |  |  | 362,768 |  |  | 327,333 |
Time deposits |  |  |  |  |  |  | 245,728 |  |  | 194,537 |
Total restricted cash and cash equivalents |  |  |  |  |  |  | $ | 618,960 |  |  | $ | 532,079 |
Total cash, cash equivalents, and restricted cash |  |  |  |  |  |  | $ | 1,551,634 |  |  | $ | 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 March 31, 2025 and December 31, 2024, such equity investments totaled $33.0 million. No material adjustments to the carrying value of these equity investments were recorded for the three months ended March 31, 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.
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The following table presents the changes in redeemable noncontrolling interests (in thousands):

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
Balance at beginning of period | $ | 230,627 |  |  | $ | 225,797 |  |  |  |  |
Net gain/(loss) attributable to redeemable noncontrolling interests | (247) |  |  | (376) |  |  |  |  |
Accretion for redeemable noncontrolling interests | 3,035 |  |  | 3,075 |  |  |  |  |
Foreign currency translation and foreign exchange adjustments for redeemable noncontrolling interests | 1,325 |  |  | (3,760) |  |  |  |  |
Balance at end of period | $ | 234,740 |  |  | $ | 224,736 |  |  |  |  |

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 March 31, |  |
| 2025 |  | 2024 |  |  |  |
Operating lease expense | $ | 7,428 |  |  | $ | 10,253 |  |  |  |  |
Variable lease expense | 1,273 |  |  | 1,721 |  |  |  |  |
Sublease income | (697) |  |  | (244) |  |  |  |  |
Total lease expense | $ | 8,004 |  |  | $ | 11,730 |  |  |  |  |

Supplemental balance sheet information related to leases was as follows (in thousands, except weighted-average figures):

|  |  | As of
| Classification |  | March 31, 2025 |  | December 31, 2024
Operating lease assets | Other assets |  | $ | 71,976 |  |  | $ | 78,562 |
Current operating lease liabilities | Accrued expenses and other |  | $ | 31,289 |  |  | $ | 33,703 |
Long-term operating lease liabilities | Other long-term liabilities |  | 75,333 |  |  | 81,093 |
Total operating lease liabilities |  |  | $ | 106,622 |  |  | $ | 114,796 |

As of March 31, 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 5.5% and 5.4%, respectively. During the three months ended March 31, 2025 and 2024, we recorded $0.3 million, and $3.7 million, respectively, of impairment charges on operating lease assets, primarily within general and administrative.
As of March 31, 2025, our lease liabilities were as follows (in thousands):

| Operating Leases |  |
Gross lease liabilities | $ | 119,424 |  |  |
Less: imputed interest | 12,802 |  |  |
Present value of lease liabilities | $ | 106,622 |  |  |

As of March 31, 2025, we have entered into leases that have not yet commenced with future minimum lease payments of $7.3 million which are not yet reflected on our consolidated balance sheet. These operating leases will commence in 2025 with lease terms of approximately one to seven years.
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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 March 31, 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 |  | March 31, 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 |  |  |  |  |  |  |  |  | (15,581) |  |  | (6,310) |
Net carrying amount |  |  |  |  |  |  |  |  | $ | 2,232,143 |  |  | $ | 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 $5.9 million for the three months ended March 31, 2025 and $6.0 million for the three months ended March 31, 2024.
As of March 31, 2025, the estimated fair value of the 2030 Notes was approximately $624 million. As of March 31, 2025 and December 31, 2024, the estimated fair value of the 2027 Notes was approximately $1.0 billion and $1.0 billion, respectively, and the estimated fair value of the 2026 Notes was approximately $518 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 a conversion condition applicable to such series of Notes is triggered. During the three months ended March 31, 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 March 31, 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
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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 March 31, 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 March 31, 2025, the Capped Call Transactions met the conditions for equity classification and were not in the money.
7. Commitments and Contingencies
The following table summarizes our non-cancelable contractual commitments as of March 31, 2025 (in thousands):

| Total |  | Remainder of 2025 |  | 2026‑2027 |  | 2028‑2029 |  | Thereafter
Operating leases (1) | $ | 126,717 |  |  | $ | 28,737 |  |  | $ | 54,728 |  |  | $ | 29,685 |  |  | $ | 13,567 |
Purchase commitments (2) | 892,459 |  |  | 257,028 |  |  | 379,094 |  |  | 256,337 |  |  | — |
Convertible note principal and interest (3) | 2,307,724 |  |  | 20,000 |  |  | 1,597,724 |  |  | — |  |  | 690,000 |
Total | $ | 3,326,900 |  |  | $ | 305,765 |  |  | $ | 2,031,546 |  |  | $ | 286,022 |  |  | $ | 703,567 |

(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.
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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 March 31, 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 March 31, 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.
8. Stock‑Based Compensation
Stock-based compensation expense is as follows (in thousands):

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
Cost of revenue | $ | 9,112 |  |  | $ | 16,806 |  |  |  |  |
Research and development | 50,594 |  |  | 87,738 |  |  |  |  |
Sales and marketing | 19,961 |  |  | 63,971 |  |  |  |  |
General and administrative | 19,123 |  |  | 97,362 |  |  |  |  |
Total stock-based compensation expense | $ | 98,790 |  |  | $ | 265,877 |  |  |  |  |

Included in the above expenses for the three months ended March 31, 2024, is $93 million 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.
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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 | (2,272,956) |  |  | $ | 5.19 |  |  |
Forfeited, cancelled, or expired | (599,984) |  |  | $ | 57.66 |  |  |
Balance as of March 31, 2025 | 20,491,516 |  |  | $ | 21.83 |  |  | 4.36

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 | 4,486,262 |  |  | $ | 24.45 |
Vested | (2,964,091) |  |  | $ | 31.28 |
Forfeited | (2,754,164) |  |  | $ | 22.79 |
Unvested as of March 31, 2025 | 28,781,282 |  |  | $ | 25.55 |

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 the three months ended March 31, 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.
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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 March 31, |  |
|  |  |  | 2025 |  | 2024 |  |  |  |
Expected dividend yield |  |  |  | — |  | — |  |  |  |
Risk-free interest rate |  |  |  | 4.1% |  | 4.1% |  |  |  |
Expected volatility |  |  |  | 69.5% |  | 66.4% |  |  |  |
Expected term (in years) |  |  |  | 6.25 |  | 6.25 |  |  |  |
Fair value of underlying common stock |  |  |  | $24.72 |  | $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:

| Three Months Ended March 31, |  |  |  |
| 2025 |  | 2024 |  |  |  |  |  |  |  |
Expected dividend yield | — |  | — |  |  |  |  |  |  |  |
Risk-free interest rate | 4.3% |  | 5.3% |  |  |  |  |  |  |  |
Expected volatility | 73.4% |  | 56.0% |  |  |  |  |  |  |  |
Expected term (in years) | 0.50 |  | 0.50 |  |  |  |  |  |  |  |
Grant-date fair value per share | $9.26 |  | $9.11 |  |  |  |  |  |  |  |

Additional information related to the ESPP is provided below (in thousands, except per share amounts):

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
Shares issued under the ESPP | 693,873 |  | 551,146 |  |  |  |
Weighted-average price per share issued | $14.19 |  | $24.92 |  |  |  |

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 months ended March 31, 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 months ended March 31, 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.
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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 March 31, 2025, we had $181.2 million of gross unrecognized tax benefits, of which $32.8 million would impact the effective tax rate, if recognized. It is reasonably possible that the amount of unrecognized tax benefits as of March 31, 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 March 31,
|  |  |  |  | 2025 |  | 2024
Convertible notes |  |  |  |  | 41,348 |  |  | 24,488 |
Stock options and PVOs |  |  |  |  | 20,492 |  |  | 29,492 |
Unvested RSUs, PVUs, and PSUs |  |  |  |  | 28,781 |  |  | 32,476 |

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, 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.
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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 three months ended March 31, 2025, we had reductions to our workforce and our office footprint, that resulted in approximately $14 million in employee separation costs, and $6 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 1,260 and 1,243 customers contributing more than $100,000 of revenue in the trailing 12 months as of March 31, 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 three months ended March 31, 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.
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| As of
| March 31, 2025 |  | March 31, 2024
Dollar-based net expansion rate | 97 | % |  | 101 | %

Our dollar-based net expansion rate as of March 31, 2025 was driven primarily by decreases in Grow Solutions revenue, due to competition in the advertising market, and to a lesser extent decreases in professional services revenue within Create Solutions, offset by growth in subscriptions revenue. Our dollar-based net expansion rate as of March 31, 2024 was driven primarily by sales of additional subscriptions and services to our existing Create Solutions customers and cross-selling our solutions to all of our customers. The decrease in dollar-based net expansion rate, compared to the comparable prior year period, is attributable to declines in Grow Solutions, and professional services revenue, as noted above.
The chart below illustrates that our dollar-based net expansion rate has been declining over the last year.
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Results of Operations
The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands):

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
Revenue | $ | 435,000 |  |  | $ | 460,380 |  |  |  |  |
Cost of revenue | 113,957 |  |  | 144,387 |  |  |  |  |
Gross profit | 321,043 |  |  | 315,993 |  |  |  |  |
Operating expenses |  |  |  |  |  |  |
Research and development | 220,625 |  |  | 282,728 |  |  |  |  |
Sales and marketing | 162,013 |  |  | 230,625 |  |  |  |  |
General and administrative | 66,340 |  |  | 177,569 |  |  |  |  |
Total operating expenses | 448,978 |  |  | 690,922 |  |  |  |  |
Loss from operations | (127,935) |  |  | (374,929) |  |  |  |  |
Interest expense | (5,891) |  |  | (6,035) |  |  |  |  |
Interest income and other income (expense), net | 58,111 |  |  | 76,643 |  |  |  |  |
Loss before income taxes | (75,715) |  |  | (304,321) |  |  |  |  |
Provision for (benefit from) Income taxes | 2,192 |  |  | (12,843) |  |  |  |  |
Net loss | $ | (77,907) |  |  | $ | (291,478) |  |  |  |  |

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 March 31, |  |
| 2025 |  | 2024 |  |  |  |
Revenue | 100 | % |  | 100 | % |  |  |  |
Cost of revenue | 26 |  |  | 31 |  |  |  |  |
Gross profit | 74 |  |  | 69 |  |  |  |  |
Operating expenses |  |  |  |  |  |  |
Research and development | 51 |  |  | 61 |  |  |  |  |
Sales and marketing | 37 |  |  | 50 |  |  |  |  |
General and administrative | 15 |  |  | 39 |  |  |  |  |
Total operating expenses | 103 |  |  | 150 |  |  |  |  |
Loss from operations | (29) |  |  | (81) |  |  |  |  |
Interest expense | (1) |  |  | (1) |  |  |  |  |
Interest income and other income (expense), net | 13 |  |  | 16 |  |  |  |  |
Loss before income taxes | (17) |  |  | (66) |  |  |  |  |
Provision for (benefit from) Income taxes | 1 |  |  | (3) |  |  |  |  |
Net loss | (18) | % |  | (63) | % |  |  |  |

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
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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 |  |
| March 31, |  |
| 2025 |  | 2024 |  |  |  |
Create Solutions | 150,378 |  |  | 163,670 |  |  |  |  |
Grow Solutions | 284,622 |  |  | 296,710 |  |  |  |  |
Total revenue | $ | 435,000 |  |  | $ | 460,380 |  |  |  |  |

Included in revenue in the first quarter of 2024 and 2025, are approximately $34 million and $17 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 months ended March 31, 2025, compared to the comparable prior year period, primarily due to a decrease in Create Solutions revenue, driven by a decrease in professional services revenue, and in consumption services revenue, partially offset by increases in subscription revenue.
The decrease in total revenue was further driven by 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 quarter of 2025, we started migrating a portion of our traffic to our new AI Platform, which we call “Unity Vector”. While we expect related revenue to improve as Unity Vector is implemented, this may be partially or fully offset by declines in select areas of the business that do not utilize Unity Vector.
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, and the amortization of intangible assets.
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 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.
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Cost of revenue for the three months ended March 31, 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 $193 million in the three months ended March 31, 2024, largely driven by the acceleration and modification of equity awards, including $15 million within cost of revenue, $43 million within research and development expense, $47 million within sales and marketing expense, and $88 million within general and administrative expense. In addition, we incurred approximately $19 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 three months ended March 31, 2025, we incurred incremental employee separation costs related to these actions of approximately $14 million, primarily within research and development, and sales and marketing. In addition, we incurred approximately $6 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 March 31, 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.
Sales and marketing expense for the three months ended March 31, 2025 decreased, compared to the comparable prior year period, 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
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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 months ended March 31, 2025 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel-related costs, driven by our reductions in headcount.
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 months ended March 31, 2025 decreased, compared to the comparable prior year period, due to a reduction in the amortization of debt issuance costs, driven by the repurchase of the 2026 Notes, partially offset by the amortization of new debt issuance costs, from the issuance of the 2030 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 March 31, 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 months ended March 31, 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.
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
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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.
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 |  |  |  |
| March 31, |  |  |  |
| 2025 |  | 2024 |  |  |  |
GAAP gross profit | $ | 321,043 |  |  | $ | 315,993 |  |  |  |  |
Add: |  |  |  |  |  |  |
Stock-based compensation expense | 9,112 |  |  | 15,636 |  |  |  |  |
Amortization of intangible assets expense | 26,700 |  |  | 26,997 |  |  |  |  |
Depreciation expense | 1,714 |  |  | 2,744 |  |  |  |  |
Restructuring and reorganization costs | 534 |  |  | 15,213 |  |  |  |  |
Adjusted gross profit | $ | 359,103 |  |  | $ | 376,583 |  |  |  |  |
GAAP gross margin | 74 | % |  | 69 | % |  |  |  |
Adjusted gross margin | 82 | % |  | 82 | % |  |  |  |

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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
| March 31,
| 2025 |  | 2024
GAAP net loss | $ | (77,907) |  |  | $ | (291,478) |
Stock-based compensation expense | 95,316 |  |  | 139,888 |
Amortization of intangible assets expense | 85,650 |  |  | 87,957 |
Depreciation expense | 10,567 |  |  | 13,853 |
Restructuring and reorganization costs | 20,345 |  |  | 211,746 |
Interest expense | 5,891 |  |  | 6,035 |
Interest income and other income (expense), net | (58,111) |  |  | (76,643) |
Provision for (benefit from) Income taxes | 2,192 |  |  | (12,843) |
Adjusted EBITDA | $ | 83,943 |  |  | $ | 78,515 |

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
| March 31,
| 2025 |  | 2024
GAAP net loss | $ | (77,907) |  |  | $ | (291,478) |
Stock-based compensation expense | 95,316 |  |  | 139,888 |
Amortization of intangible assets expense | 85,650 |  |  | 87,957 |
Depreciation expense | 10,567 |  |  | 13,853 |
Restructuring and reorganization costs | 20,345 |  |  | 211,746 |
Income tax impact of adjusting items | (27,764) |  |  | (46,618) |
Adjusted net income used for calculation of adjusted EPS, before impact of dilutive instruments | $ | 106,207 |  |  | $ | 115,348 |
Increase from forgone financing costs on dilutive convertible notes, net of tax | 4,597 |  |  | 4,684 |
Adjusted net income used for calculation of adjusted EPS, including impact of dilutive instruments | $ | 110,804 |  |  | $ | 120,032 |
Weighted-average common shares used in GAAP diluted net loss per share attributable to Unity Software Inc. | 411,852 |  |  | 387,151 |
Convertible notes | 30,494 |  |  | 25,613 |
Stock options and PVOs | 6,863 |  |  | 15,854 |
Unvested RSUs, PVUs, and PSUs | 5,166 |  |  | 6,345 |
ESPP | 650 |  |  | 150 |
Non-GAAP weighted-average common shares used in adjusted EPS | 455,025 |  |  | 435,113 |

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| Three Months Ended
| March 31,
| 2025 |  | 2024
GAAP diluted net loss per share attributable to Unity Software Inc. | $ | (0.19) |  |  | $ | (0.75) |
Total impact on diluted net loss per share attributable to Unity Software Inc. from non-GAAP adjustments | $ | 0.45 |  |  | $ | 1.05 |
Total impact on diluted net loss per share attributable to Unity Software Inc. from antidilutive common stock now included | $ | (0.02) |  |  | $ | (0.02) |
Adjusted EPS | $ | 0.24 |  |  | $ | 0.28 |

Free Cash Flow
We define free cash flow as net cash provided by (used in) 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.
The following table presents a reconciliation of free cash flow to net cash provided by (used in) operating activities, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):

| Three Months Ended March 31,
| 2025 |  | 2024
Net cash provided by (used in) operating activities | $ | 13,026 |  |  | $ | (7,373) |
Less: |  |  |
Purchases of property and equipment | (5,718) |  |  | (7,190) |
Free cash flow | $ | 7,308 |  |  | $ | (14,563) |
Net cash used in investing activities | $ | (5,718) |  |  | $ | (7,190) |
Net cash provided by (used in) financing activities | $ | 12,248 |  |  | $ | (389,001) |

Liquidity and Capital Resources
As of March 31, 2025, our principal sources of liquidity were cash and cash equivalents totaling $1.5 billion, which were primarily held for working capital purposes. Our cash equivalents are invested primarily in government money market funds and in time deposits.
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 $3.8 billion as of March 31, 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
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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 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):

| Three Months Ended March 31,
| 2025 |  | 2024
Net cash provided by (used in) operating activities | $ | 13,026 |  |  | $ | (7,373) |
Net cash used in investing activities | (5,718) |  |  | (7,190) |
Net cash provided by (used in) financing activities | 12,248 |  |  | (389,001) |
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash | 4,197 |  |  | (6,202) |
Net change in cash, cash equivalents, and restricted cash | $ | 23,753 |  |  | $ | (409,766) |

Cash Provided by Operating Activities
During the three months ended March 31, 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 three months ended March 31, 2025, net cash used in investing activities consisted primarily of purchases of property and equipment.
Cash Provided by Financing Activities
During the three months ended March 31, 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.
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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.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this report.
(a) Evaluation of Disclosure Controls and Procedures
Based on management's evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were designed to, and were effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
(b) Changes in Internal Control Over Financial Reporting
Based on management's evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially effect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
On July 6, 2022, a putative securities class action complaint was filed in U.S. District Court in the Northern District of California against the Company and certain of its executives (the "Securities Class Action"). The complaint was amended on March 24, 2023, and captioned In re Unity Software Inc. Securities Litigation, Case No. 5:22-cv-3962 (N.D. Cal.). The operative complaint names as defendants Unity, its former Chief Executive Officer, former Chief Financial Officer, and former General Manager of Operate Solutions, as well as Unity shareholders, Sequoia Capital, Silver Lake Group, and David Helgason. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and alleges that the Company and its executives made false or misleading statements and/or failed to disclose issues with the Company's product platform and the likely impact of those issues on the Company's fiscal 2022 guidance. The plaintiffs seek to represent a class of all persons and entities (other than the defendants) who acquired Unity securities between May 11, 2021 and May 10, 2022, and requests unspecified damages, pre- and post-judgment interest, and an award of attorneys' fees and costs. The Court dismissed the case with prejudice on March 12, 2025 and entered judgement on April 14, 2025.
On November 22, 2022, a derivative suit, captioned Movva v. Unity Software, Inc., et al., Case 5:22-cv-07416 (N.D. Cal.) (the "Movva Suit"), was filed by a purported stockholder against eleven of the Company's current and former officers and directors. The complaint, which asserts claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment, and violations of Section 14(a) of the Exchange Act, borrows the allegations of the Securities Class Action, and recasts them as derivative claims. On December 16, 2022, a related derivative suit, captioned Duong vs. Unity Software Inc., et al., Case 5:22-c-08926 (N.D. Cal.), was filed by a purported stockholder against the same defendants as in the Movva Suit (the "Duong Suit," and together with the Movva Suit, the "Federal Derivative Actions"). The two Federal Derivative Actions were consolidated after the parties jointly moved to do so. The Federal Derivative Actions are currently stayed. On May 8, 2023, a stockholder derivative suit, captioned Wen v. Botha, et al., Case No. 2023-0499 (the “Wen Suit”), was filed in the Court of Chancery of the State of Delaware. The case was filed by a purported Unity stockholder against twelve of the Company's current and former officers and directors, and asserts claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets. On December 15, 2023, a stockholder derivative suit, captioned Flesner v. Riccitiello, et al., Case No. 2023-1240 (the "Flesner Suit" and together with the Wen Suit, the "Delaware Derivative Actions"), was filed in the Court of Chancery of the State of Delaware. The case was filed by a purported Unity stockholder against twelve of the Company's current and former officers and directors, and asserts claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and waste of corporate assets, as well as insider trading claims against the individual defendants. As with the Federal Derivative Actions, the Delaware Derivative Actions borrow the allegations of the Securities Class Action, and recast them as derivative claims. The Delaware Derivative Actions are currently stayed. It is possible that additional suits will be filed, or allegations received from shareholders, with respect to these same or other matters, naming Unity and/or its officers and directors as defendants. We dispute these allegations and intend to vigorously defend ourselves in these matters.
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.
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Item 1A. Risk Factors
Other than the risk factors listed below, there have been no material changes from the risk factors previously described under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.
Purchasing or owning Unity common stock involves investment risks including, but not limited to, the risks described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, and below. Any one of those risks could harm our business, financial condition and results of operations or reputation, which could cause our stock price to decline. Additional risks, trends and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business, financial condition, results of operations or reputation.
If we fail to timely release updates and new features to our platform and adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or changing customer needs, requirements, or preferences, our platform may become less competitive.
The markets in which we compete are subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. For example, in the first quarter of 2025 we announced the roll out of our new machine-learning model, Unity Vector. While we expect related revenue to improve as Unity Vector is implemented, this may be partially or fully offset by declines in select areas of the business that do not utilize Unity Vector. In addition, if we fail to execute on the rebuild and launch of our machine learning stack and data infrastructure, including Unity Vector, on a timely basis or at all, our business could be harmed. Similarly, emerging technologies like artificial intelligence could impact the way that customers utilize our solutions as well as enhance the functionality of our solutions. 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. In addition, if our investments in fundamental product enhancements do not increase performance in a sustainable manner, or fail to do so on the timelines we expect, then our revenue, particularly from our Grow Solutions, would be harmed.
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, advancements in competing technologies, and end-user demands and expectations, which will require us to incur additional costs to implement. 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.
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.
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International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects.
The recent announcements of substantial new tariffs and other restrictive trade policies have created a dynamic and unpredictable trade landscape, which may adversely impact our business. Although our current business model is not directly reliant on the import or export of physical goods, trade policies may indirectly adversely impact our business and operations. For example, current and future tariffs on hardware, networking infrastructure or other technology infrastructure used by us or our third-party vendors could raise costs, constrain supply or affect service reliability, which could harm our competitive position, reduce customer demand and damage customer relationships. In addition, many of our customers operate businesses that may be impacted by trade policies, which may result in decreased demand for our services or extended sales cycles as customers assess the impact of evolving trade policies on their operations and face increased costs or decreased revenue due to tariffs and trade restrictions.
Trade disputes, trade restrictions, tariffs, and other political tensions between the U.S. and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also negatively impact customer demand for our services, delay renewals or limit expansion opportunities with existing customers, limit our access to capital, or otherwise negatively impact our business and operations. Ongoing tariff and macroeconomic uncertainty has and may continue to contribute to volatility in the price of our common stock.
In addition, retaliatory trade policies or anti-U.S. sentiment in certain regions whether driven by trade tensions, political disagreements, or regulatory concerns may make customers and governments more hesitant to adopt solutions offered by U.S.-based providers. This may lead to increased preference for local competitors, changes to government procurement policies, heightened regulatory scrutiny, decreased intellectual property protections, delays in regulatory approvals or other retaliatory regulatory non-tariff policies, the introduction of trade barriers applicable to digital services, which may result in heightened international legal and operational risks and difficulties in attracting and retaining non-U.S. customers, suppliers, employees, partners and investors.
While we continue to monitor trade developments, the ultimate impact of these risks remains uncertain and any prolonged economic downturn, escalation in trade tensions, or deterioration in international perception of U.S.-based companies could materially and adversely affect our business, results of operations, financial condition and prospects. In addition, tariffs and other trade developments have and may continue to heighten the risks related to the other risk factors described elsewhere in this report and in our Annual Report for the fiscal year ended December 31, 2024.
Risks Related to Our Convertible Notes
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.
In February 2025, we issued approximately $690 million in aggregate principal amount of 0% convertible senior notes due 2030 (the "2030 Notes"), 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 approximately $1.7 billion in aggregate principal amount of 0% convertible senior notes due 2026 (the "2026 Notes," together with the 2030 Notes and 2027 Notes, the "Notes"). In the first quarter of 2025 and first quarter of 2024, we repurchased approximately $642 million and $480 million, respectively, aggregate principal amount of our 2026 Notes in privately negotiated transactions with holders of the 2026 Notes and as of March 31, 2025, we had approximately $558 million aggregate principal amount of 2026 Notes outstanding. We are subject to a variety of risks related to the Notes, such as:
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•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;
•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;
•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. 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;
•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 other securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material. 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; and
•the conditional conversion features of the 2030 Notes and the 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our liquidity if we elect or are required to settle a portion or all of our conversion obligation through the payment of cash.
The conditional conversion features of the 2030 Notes and 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our financial condition and operating results.
In the event the conditional conversion features of the 2030 Notes or 2026 Notes is triggered, holders of the 2030 Notes or 2026 Notes will be entitled under the indenture governing the 2030 Notes or 2026 Notes to convert their 2030 Notes or 2026 Notes, as applicable, at any time during specified periods at their option. Holders of the 2027 Notes are entitled under the indenture governing the 2027 Notes to convert their 2027 Notes at any time prior to maturity. If one or more holders elect to convert their 2030 Notes or 2026 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. As of December 31, 2024, no 2030 Notes were outstanding and the 2026 Notes were not convertible at the option of the holders thereof. In addition, even if holders do not elect to convert their 2030 Notes or 2026 Notes, we could be required under applicable accounting rules to classify or reclassify all or a portion of the outstanding principal of the 2030 Notes or 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
The capped call transactions may affect the value of the 2030 Notes or 2026 Notes and our common stock.
In addition, in connection with the issuance of the 2030 Notes and the 2026 Notes, we entered into capped call transactions (the "Capped Call Transactions") with certain of the initial purchasers of the 2030 Notes and 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
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stock initially underlying the 2030 Notes and the 2026 Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of 2030 Notes or 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2030 Notes or 2026 Notes, as the case may be, with such reduction and/or offset subject to a cap. In connection with establishing their initial hedges of the Capped Call Transactions, the option counterparties or their respective affiliates likely entered into various derivative transactions with respect to our common stock and/or purchased shares of our common stock concurrently with or shortly after the pricing of the 2030 Notes or the 2026 Notes, including with certain investors in the 2030 Notes or the 2026 Notes. The option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2030 Notes or the 2026 Notes (and are likely to do so on each exercise date of the Capped Call Transactions or, to the extent we exercise the relevant election under the Capped Call Transactions, following any repurchase, redemption or conversion of the 2030 Notes or the 2026 Notes). We cannot make any prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the prices of the 2030 Notes, 2026 Notes, the 2027 Notes or the shares of our common stock. Any of these activities could adversely affect the value of the 2030 Notes, 2026 Notes, the 2027 Notes and our common stock.
We are subject to counterparty risk with respect to the Capped Call Transactions.
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. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Capped Call Transaction with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds
None.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
Rule 10b5-1 Trading Plans
The adoption or termination of contracts, instructions or written plans for the purchase or sale of our securities by our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended March 31, 2025, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, were as follows:

Name |  | Title |  | Action |  | Adoption Date |  | Expiration Date (1) |  | Aggregate # of Securities to be Purchased/Sold
Tomer Bar-Zeev |  | Director |  | Adoption |  | March 4, 2025 |  | December 31, 2025 |  | 1,500,000
Shlomo Dovrat |  | Director |  | Adoption |  | March 11, 2025 |  | December 10, 2025 |  | 100,000
Felix Thé |  | SVP Product & Technology, Grow |  | Adoption |  | March 13, 2025 |  | December 31, 2025 |  | (2)

(1) Each of the plans expire on the respective dates shown, or upon the earlier completion of all authorized transactions under the plans.
(2) The plan provides for the sale of approximately $17,000 of our common stock per month based on the trading price of our common stock for 6 months. The actual number of shares that will be subject to the plan is dependent on the trading price of our common stock at future dates and is not yet determinable.
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Item 6. Exhibits
EXHIBIT INDEX

|  |  |  | Incorporated by Reference |  |
Exhibit Number |  | Description of Exhibit |  | Form |  | File Number |  | Exhibit |  | Filing Date |  |
3.1 |  | Amended and Restated Certificate of Incorporation of the Registrant |  | 8-K |  | 001-39497 |  | 3.1 |  | September 22, 2020 |  |
3.2 |  | Amended and Restated Bylaws of the Registrant |  | 8-K |  | 001-39497 |  | 3.2 |  | September 8, 2023 |  |
4.1 |  | Indenture, dated as of February 27, 2025, by and between Unity Software Inc. and U.S. Bank Trust Company, National Association, as Trustee |  | 8-K |  | 001-39497 |  | 4.1 |  | February 27, 2025 |  |
4.2 |  | Form of Global Note, representing Unity Software Inc.’s 0% Convertible Senior Notes due 2030 (included as Exhibit A to the Indenture filed as Exh i bit 4.1) |  | 8-K |  | 001-39497 |  | 4.2 |  | February 27, 2025 |  |
10.1 |  | Amended and Restated Non-Employee Director Compensation Policy |  | 8-K |  | 001-39497 |  | 99.2 |  | May 1, 2024 |  |
10.2 |  | Form of Grant Notice and Award Agreement for P S Us |  | 8-K |  | 001-39497 |  | 10.1 |  | March 10, 2025 |  |
10.3 |  | Form of Confirmation for Capped Call Transactions |  | 8-K |  | 001-39497 |  | 10.1 |  | February 27, 2025 |  |
10.4* |  | Unity Software Inc. 2020 Equity Incentive Plan and related form agreements |  |  |  |  |  |  |  |  |  |
10.5* |  | Unity Software Inc. IronSource Share Incentive Plan and related form agreements |  |  |  |  |  |  |  |  |  |
31.1* |  | Section 302 Certification of Principal Executive Officer |  |  |  |  |  |  |  |  |  |
31.2* |  | Section 302 Certification of Principal Financial Officer |  |  |  |  |  |  |  |  |  |
32.1*# |  | Section 906 Certification of Principal Executive Officer and Principal Financial Officer |  |  |  |  |  |  |  |  |  |
101.INS |  | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |  |  |  |  |  |  |  |  |  |
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document |  |  |  |  |  |  |  |  |  |
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  |  |  |  |  |  |
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  |  |  |  |  |  |  |  |  |
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  |  |  |  |  |  |  |  |  |
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  |  |  |  |  |  |
104 |  | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |  |  |  |  |  |  |  |  |  |
* |  | Filed herewith. |  |
# |  | The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Registrant's filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in any such filing. |  |
|  | The agreements and other documents filed as exhibits to this Quarterly Report on Form 10-Q are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time. |  |

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Table of Contents |  | Unity Software Inc.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | UNITY SOFTWARE INC.
Date: May 7, 2025 |  | By: | /s/ Mark Barrysmith
|  |  | Mark Barrysmith
|  |  | Chief Accounting Officer
|  |  | (Principal Accounting Officer)

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