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What changed in Unity Software Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Unity Software Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+282 added−295 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-29)

Top changes in Unity Software Inc.'s 2024 10-K

282 paragraphs added · 295 removed · 236 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWhile we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us as a whole. We also have trademark rights in our name and other brand indicia and have trademark registrations for select marks in the United States and other jurisdictions around the world.
Biggest changeAs of such date, we also had 1 registered design patent in the United States and 31 registered design patents in non-U.S. jurisdictions. While we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us as a whole.
In November 2022, we completed the transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement"), dated July 13, 2022, by and among Unity Software Inc., Ursa Aroma Merger Subsidiary Ltd., a company organized under the laws of the State of Israel and a direct wholly owned subsidiary of Unity, and ironSource Ltd., a company organized under the laws of the State of Israel ("ironSource", and such transactions, the "ironSource Merger").
In November 2022, we completed the transactions contemplated by the Agreement and Plan of Merger, dated July 13, 2022, by and among Unity Software Inc., Ursa Aroma Merger Subsidiary Ltd., a company organized under the laws of the State of Israel and a direct wholly owned subsidiary of Unity, and ironSource Ltd., a company organized under the laws of the State of Israel ("ironSource", and such transactions, the "ironSource Merger").
Outside of gaming, we also compete with other development platforms that offer 2D and 3D design products. • Grow Solutions: We operate in a fragmented ecosystem composed of privately held companies up to select divisions of large, well-established companies. The large companies in our ecosystem may play multiple different roles given the breadth of their business.
Outside of gaming, we also compete with other development platforms that offer 2D and 3D design products. • Grow Solutions: We operate in a fragmented ecosystem composed of privately held companies up to select divisions of large, well-established public companies. The large companies in our ecosystem may play multiple different roles given the breadth of their business.
Our platform consists of two complementary sets of solutions: Create Solutions and Grow Solutions which together comprise our strategic portfolio surrounding the Unity Engine, Cloud and Monetization. Create Solutions Our Create Solutions are a robust set of tools and services used to build, ship and run high-definition, real-time 2D and 3D content.
Our platform consists of two complementary sets of solutions: Create Solutions and Grow Solutions, which together comprise our "Strategic Portfolio" surrounding the Unity Engine and related consumption services, and Monetization. Create Solutions Our Create Solutions are a robust set of tools and services used to build, ship and run high-definition, real-time 2D and 3D content.
Designed for developers, these tools and services are used across a range of industries ranging from games to aerospace, construction to retail, medical to manufacturing, and beyond.
Designed for developers, these tools and services are used across a range of industries from games to automotive, aerospace, construction to retail, medical to manufacturing, and beyond.
Enhanced by cloud services including asset management, DevOps tools and multiplayer game support, creators can leverage our products and extensibility to easily edit, run, and iterate interactive RT3D and 2D experiences that can be created once and deployed to a variety of platforms.
Enhanced by cloud services including asset management, DevOps tools and multiplayer game support, creators can leverage our products and extensibility to easily edit, run, and iterate interactive real-time 2D and 3D experiences that can be created once and deployed to a variety of platforms.
Nevertheless, compliance with existing or future governmental regulations, including, but 3 Table of Contents Unity Software Inc. not limited to, those pertaining to global trade, business acquisitions, consumer and data protection, and taxes, could have a material impact on our business in subsequent periods. Refer to "Item 1A. Risk Factors" for a discussion of these potential impacts.
Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, business acquisitions, consumer and data protection, and taxes, could have a material impact on our business in subsequent periods. Refer to "Item 1A. Risk Factors" for a discussion of these potential impacts.
We believe we compete favorably with respect to these factors. Refer to "Item 1A. Risk Factors" for a discussion of risks related to competition. Privacy and Data Security Creative assets, performance and user data are critical to our customers’ businesses.
We believe we compete favorably with respect to these factors. Refer to "Item 1A. Risk Factors" for a discussion of risks related to competition. 2 Table of Contents Unity Software Inc. Privacy and Data Security Creative assets, performance and user data are critical to our customers’ businesses.
We devote considerable resources to our security program, regularly testing the security of user assets utilized by our services, and developing easy-to-use features that content creators can leverage to enhance the 2 Table of Contents Unity Software Inc. security of their creative products.
We devote considerable resources to our security program, regularly testing the security of user assets utilized by our services, and developing easy-to-use features that content creators can leverage to enhance the security of their creative products.
Copies of our reports on Forms 10-K, Forms 10-Q, and Forms 8-K, may be obtained, free of charge, electronically on this website as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC.
Forms 8-K, may be obtained, free of charge, electronically on this website as soon as reasonably practicable after we file such material with, or furnish such material to, the SEC.
We believe that the principal competitive factors in our market are: • cross-platform deployability; • the pace and quality of new product innovation; • product capabilities, including flexibility, scalability, performance, security, and reliability; • integration with existing platforms; • high-quality customer support, training, and services; • brand recognition and reputation; • return on investment of sales and marketing efforts; • volume and leverage of user data and analytics; • price and affordability of our solutions and customer economics; • ease of use of products; and • ability to expand to adjacent industries.
We believe that the principal competitive factors in our market are: • cross-platform deployability; • the pace and quality of new product innovation, such as the rise of AI and machine learning and the increasing use of data and trained models; • supply from publishers, who may also use channels beyond in-app advertising to grow revenue; • product capabilities, including flexibility, scalability, performance, security, and reliability; • integration with existing platforms; • high-quality customer support, training, and services; • brand recognition and reputation; • return on investment of sales and marketing efforts; • volume and leverage of user data and analytics; • price and affordability of our solutions and customer economics; • ease of use of products; and • ability to expand to adjacent industries.
Our principal corporate offices are located in San Francisco, California. We completed our initial public offering in September 2020 and our common stock is listed on the New York Stock Exchange under the symbol "U".
We completed our initial public offering in September 2020 and our common stock is listed on the New York Stock Exchange under the symbol "U".
Available Information Our investor relations website is https://investors.unity.com/ and we encourage investors to use it as a way of easily finding information about us.
Available Information Our investor relations website is https://investors.unity.com/ and we encourage investors to use it as a way of easily finding information about us. Copies of our reports on Forms 10-K, Forms 10-Q, and 3 Table of Contents Unity Software Inc.
It is our practice to enter into confidentiality agreements with our third parties in order to limit access to, disclosure, and use of, our confidential information and proprietary information. We further control the use of our proprietary technology and intellectual property through provisions in our terms of service.
We control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners. It is our practice to enter into confidentiality agreements with our third parties in order to limit access to, disclosure, and use of, our confidential information and proprietary information.
As of December 31, 2023, we had 246 issued utility patents in the United States that expire between 2029 and 2041, 47 issued utility patents in non-U.S. jurisdictions, and 90 utility patent applications (including 6 provisional applications and 16 active PCT applications) pending in the United States and globally.
As of December 31, 2024, we had 256 issued utility patents in the United States that expire between 2031 and 2042, 34 issued utility patents in non-U.S. jurisdictions, and 59 utility patent applications (including 3 provisional applications) pending in the United States and globally.
We had 3,844 employees in technical roles, which accounted for approximately 57% of our total headcount. In addition, our geographic diversification enhances our ability to retain and attract talent, and as of December 31, 2023, approximately 75% of our full-time employees were located outside of the United States.
In addition, our geographic diversification enhances our ability to retain and attract talent, and as of December 31, 2024, approximately 77% of our full-time employees were located outside of the United States. Unity's benefit offerings are designed to help attract and retain our workforce.
Our platform is used by creators of all types - such as developers, artists, and designers - to build content for various industries, including gaming, retail, automotive, architecture, engineering, and construction. Unity was originally founded as Over the Edge Entertainment in Denmark in 2004. In 2009, we reorganized as a Delaware corporation and changed our name to Unity Software Inc.
Unity was originally founded as Over the Edge Entertainment in Denmark in 2004. In 2009, we reorganized as a Delaware corporation and changed our name to Unity Software Inc. Our principal corporate offices are located in San Francisco, California.
We also have registered domain names for websites that we use in our business, such as www.unity.com and similar variations. We control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners.
We also have trademark rights in our name and other brand indicia and have trademark registrations for select marks in the United States and other jurisdictions around the world. We also have registered domain names for websites that we use in our business, such as www.unity.com and similar variations.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective. Human Capital Management As of December 31, 2023, we had a total of 6,748 full-time employees, across 57 offices and in 19 countries. We also engage contractors and consultants.
Human Capital Management As of December 31, 2024, we had a total of 4,987 full-time employees, across 34 offices and in 17 countries. We also engage contractors and consultants. We had 3,217 employees in technical roles, which accounted for approximately 65% of our total headcount.
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Item 1. Business General Unity is the world's leading platform for creating and growing interactive, real-time 3D ("RT3D") content and experiences. Our comprehensive set of software, including AI solutions, supports creators through the entire development lifecycle as they build, run, and grow immersive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.
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Item 1. Business General Unity is the leading platform to create and grow games and interactive experiences. We offer a suite of tools across all major platforms from mobile, PC, and console, to extended reality (XR).
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As of such date, we also had 1 registered design patent in the United States, 36 registered design patents in non-U.S. jurisdictions and 4 pending design patent applications, 1 of which is in the United States.
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Our comprehensive set of software, including AI solutions, supports developers through the entire development lifecycle – from prototyping to live service operation, user acquisition, and monetization. Our platform is used by creators of all types - such as developers, artists, and designers - to build content in gaming and non-gaming industries, including retail, automotive, architecture, engineering, and construction.
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In the fourth quarter of 2023, we initiated a number of steps to reduce our cost structure. For example, we announced and substantially completed plans to scale back our office footprint by approximately 14 locations, and in the first quarter of 2024, we announced plans to reduce approximately 1,800 employee roles, or approximately 25% of our then-current workforce.
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We further control the use of our proprietary technology and intellectual property through provisions in our terms of service. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective.
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While we believe these steps were necessary to position Unity for long-term and profitable growth, we still believe that having a strong culture is essential for driving that long-term success. Our culture is fueled by our commitment to our values, inclusion, and social impact, making Unity an attractive place for top talent to work and grow.
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We invest in our culture in many ways, including a Unity Leadership Program run by senior leaders, frequent Town Hall meetings, executive roundtables, manager and employee development opportunities, and a global Workplace Experience team dedicated to curating local cultural events. Unity's benefit offerings are designed to meet the varied and evolving needs of a diverse workforce.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSpecifically, we have faced and may continue to face competition as a result of: • the internal development of alternative solutions by a significant number of companies, including other gaming companies; • lower prices or free solutions offered by our competitors, some of whom may offer more favorable payment terms to publishers; • mergers, acquisitions and other strategic relationships amongst our competitors which may allow them to provide more comprehensive offerings or achieve greater economies of scale than us, and may introduce new competitors in our markets; • intense competition within the gaming market which may impact our company and a significant number of our customers, who also operate in the gaming market; • the introduction of alternative solutions by larger, more experienced companies that offer 2D and 3D design solutions in the industries in which we may expand into; and • rapid technological change, such as the rise of AI and machine learning, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences.
Biggest changeSpecifically, we have faced and may continue to face competition as a result of: • increased costs for advertisers to target users due to changes in the privacy landscape; • reduced supply from publishers, who may also use channels beyond in-app advertising to grow revenue; • rapid technological change, such as the rise of AI and machine learning, increasing use of data and trained models, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences; • the internal development of alternative solutions by a significant number of companies, including other gaming companies; • lower prices or free solutions offered by our competitors, some of whom may offer more favorable payment terms to publishers; • mergers, acquisitions and other strategic relationships amongst our competitors which may allow them to provide more comprehensive offerings or achieve greater economies of scale than us, and may introduce new competitors in our markets; • intense competition within the gaming market which may impact our company and a significant number of our customers, who also operate in the gaming market; and • the introduction of alternative solutions by larger, more experienced companies that offer 2D and 3D design solutions in the industries in which we may expand into.
While certain features of our solutions are designed to address the needs of professional developers, we believe that our ability to expand adoption of our platform will depend in part on our ability to address the needs of creators with varied needs and levels of expertise, including artists, animators and sound technicians, as well as new categories of creators and end users, such as architects, civil and mechanical engineers, and designers, in industries beyond gaming.
While certain features of our solutions are designed to address the needs of professional developers, we believe that our ability to expand adoption of our platform will depend in part on our ability to address the needs of creators with varied needs and levels of expertise, including artists, animators and sound technicians, as well as new categories of creators and end users in industries beyond gaming such as architects, civil and mechanical engineers, and designers.
If we fail to protect our intellectual property rights adequately, or fail to continuously innovate and advance our technology, our competitors could gain access to our proprietary technology and develop and commercialize substantially identical products, services or technologies. In addition, defending our intellectual property rights might entail significant 21 Table of Contents Unity Software Inc. expense.
If we fail to protect our intellectual property 21 Table of Contents Unity Software Inc. rights adequately, or fail to continuously innovate and advance our technology, our competitors could gain access to our proprietary technology and develop and commercialize substantially identical products, services or technologies. In addition, defending our intellectual property rights might entail significant expense.
Our inability to enforce our unique licensing structure, including financial eligibility tiers, and our inability to protect our proprietary technology against unauthorized copying or use, including circumvention of licensing or usage restrictions as well as any costly litigation or diversion of our management's attention and resources, could delay further sales or the implementation of our solutions, impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation. 22 Table of Contents Unity Software Inc.
Our inability to enforce our unique licensing structure, including financial eligibility tiers, and our inability to protect our proprietary technology against unauthorized copying or use, including circumvention of licensing or usage restrictions as well as any costly litigation or diversion of our management's attention and resources, could delay further sales or the implementation of our solutions, 22 Table of Contents Unity Software Inc. impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation.
Any intellectual property claim asserted against us, or for which we are required to provide indemnification, may require us to do one or more of the following: • cease selling or using solutions that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate; • make substantial payments for legal fees, settlement payments or other costs or damages; • obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or • redesign or rebrand the allegedly infringing solutions to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible. 23 Table of Contents Unity Software Inc.
Any intellectual property claim asserted against us, or for which we are required to provide indemnification, may require us to do one or more of the following: • cease selling or using solutions that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate; • make substantial payments for legal fees, settlement payments or other costs or damages; • obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or 23 Table of Contents Unity Software Inc. • redesign or rebrand the allegedly infringing solutions to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible.
New regulation by the U.S. federal government and its agencies, such as the Federal Trade Commission ("FTC"), U.S. states and state agencies or foreign jurisdictions, which may vary significantly across jurisdictions, could require that certain game content be modified or removed from games, increase the 32 Table of Contents Unity Software Inc. costs of operating our customer's games, impact player engagement and thus the functionality and effectiveness of our Grow Solutions or otherwise harm our business performance.
New regulation by the U.S. federal government and its agencies, such as the Federal Trade Commission ("FTC"), U.S. states and state agencies or foreign jurisdictions, which may vary significantly across 32 Table of Contents Unity Software Inc. jurisdictions, could require that certain game content be modified or removed from games, increase the costs of operating our customer's games, impact player engagement and thus the functionality and effectiveness of our Grow Solutions or otherwise harm our business performance.
We are subject to a variety of risks related to the Notes, such as: • 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; 33 Table of Contents Unity Software Inc. • 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.
We are subject to a variety of risks related to the Notes, such as: • 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; 33 Table of Contents Unity Software Inc. • 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.
Our current and future global business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of our platform by creators outside the U.S., for example, in China where we experienced softness throughout 2023; • the need to adapt and localize our platform for specific countries; • maintaining our company culture, which emphasizes developing and launching new and innovative solutions and which we believe is essential to our business, across all of our offices globally and requires aligning our values across cultures and viewpoints; • difficulty collecting accounts receivable and potential for longer payment cycles; • increased reliance on resellers and other third parties for our global expansion; 13 Table of Contents Unity Software Inc. • burdens of complying with a variety of foreign laws, including costs associated with legal structures, accounting, statutory filings and tax liabilities; • stringent and evolving regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe and China; • differing and potentially more onerous labor regulations and practices, especially in Europe; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, statutory equity requirements and compliance programs that are specific to each jurisdiction; • unexpected changes in trade relations, regulations, laws or enforcement, including changes to export control restrictions, economic sanctions, and trade embargoes; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure and legal compliance costs associated with multiple global locations and subsidiaries; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of hedging transactions; • higher levels of credit risk and payment fraud, particularly the risk that excessive fraudulent activity could harm our ability to meet credit card association merchant standards and our right to accept credit cards for payment; • restrictions on the transfer of funds, such as limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • reduced or uncertain intellectual property protection or difficulties obtaining, maintaining, protecting or enforcing our intellectual property rights, including foreign government interference with our intellectual property that resides outside of the U.S.; • political instability, societal unrest, hostilities, war, or terrorist activities, including in Israel or the surrounding region where a significant portion of our Grow Solutions team is located; and subsequent retaliatory measures and sanctions; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Our current and future global business and operations involve a variety of risks, including: • slower than anticipated availability and adoption of our platform by creators outside the U.S., for example, in China where we experienced softness throughout 2023 and 2024; • the need to adapt and localize our platform for specific countries; • maintaining our company culture, which emphasizes developing and launching new and innovative solutions and which we believe is essential to our business, across all of our offices globally and requires aligning our values across cultures and viewpoints; • difficulty collecting accounts receivable and potential for longer payment cycles; 13 Table of Contents Unity Software Inc. • increased reliance on resellers and other third parties for our global expansion; • burdens of complying with a variety of foreign laws, including costs associated with legal structures, accounting, statutory filings and tax liabilities; • stringent and evolving regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe and China and certain U.S. states; • differing and potentially more onerous labor regulations and practices, especially in Europe; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, statutory equity requirements and compliance programs that are specific to each jurisdiction; • changes in trade relations, particularly with China, regulations, laws or enforcement, including changes to export control restrictions, economic sanctions, and trade embargoes; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure and legal compliance costs associated with multiple global locations and subsidiaries; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of hedging transactions; • higher levels of credit risk and payment fraud, particularly the risk that excessive fraudulent activity could harm our ability to meet credit card association merchant standards and our right to accept credit cards for payment; • restrictions on the transfer of funds, such as limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • reduced or uncertain intellectual property protection or difficulties obtaining, maintaining, protecting or enforcing our intellectual property rights, including foreign government interference with our intellectual property that resides outside of the U.S.; • political instability, societal unrest, hostilities, war, or terrorist activities, including in Israel or the surrounding region where a significant portion of our Grow Solutions team is located; and subsequent retaliatory measures and sanctions; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
If one or more holders elect to convert their 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.
Under such models, our customers depend on us as a source of their own revenue, which in some cases may represent a significant portion of their revenue. Should customers lose confidence in the value or effectiveness of our Monetization solutions or if our Grow Solutions are less effective, consumption of these offerings could decline.
Under such models, our customers depend on us as a source of their own revenue, which in some cases may represent a significant portion of their revenue. Should customers lose confidence in the value or effectiveness of our Grow Solutions or if our Grow Solutions are less effective, consumption of these offerings could decline.
Macroeconomic factors like labor shortages, supply chain disruptions, and inflation continue to cause logistical challenges, increased input costs, and inventory constraints for advertisers. These factors have in the past decreased, and may in the future decrease or halt, advertiser spending.
In addition, macroeconomic factors like labor shortages, supply chain disruptions, and inflation continue to cause logistical challenges, increased input costs, and inventory constraints for advertisers. These factors have in the past decreased, and may in the future decrease or halt, advertiser spending.
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 2026 Notes or the shares of our common stock. Any of these activities could adversely affect the value of the 2026 Notes and our common stock.
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 2026 Notes, the 2027 Notes or the shares of our common stock. Any of these activities could adversely affect the value of the 2026 Notes, the 2027 Notes and our common stock.
We also use various third-party cloud hosting providers such as Google Cloud, AWS and Tencent to provide cloud infrastructure for our platform. Our Create Solutions and Grow Solutions rely on the operations of this infrastructure.
We also use various third-party cloud hosting providers such as Google Cloud, AWS, Azure, and Tencent to provide cloud infrastructure for our platform. Our Create Solutions and Grow Solutions rely on the operations of this infrastructure.
These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, delete our models, or prevent or limit our use of AI/ML.
These obligations may make it harder for us to conduct our business using AI/ML, lead to litigation or regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, delete our models, or prevent or limit our use of AI/ML.
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 equity securities, in open market purchases, privately negotiated transactions or otherwise.
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.
Operating our business and platform involves the collection, storage and transmission of sensitive, proprietary and confidential information, including personal information of our personnel, customers and their end users, our proprietary and confidential information and the confidential information we collect from our partners, customers and creators.
Operating our business and platform involves the collection, processing, storage and transmission of sensitive, proprietary and confidential information, including personal information of our personnel, customers and their end users, our proprietary and confidential information and the confidential information we collect from our partners, customers and creators.
In November 2022, we issued $1.0 billion in aggregate principal amount of 2.0% convertible senior notes due 2027 (the "2027 Notes"), and in November 2021 we issued $1.7 billion in aggregate principal amount of 0% convertible senior notes due 2026 (the "2026 Notes," together with the 2027 Notes, the "Notes").
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 2027 Notes, the "Notes").
Such incidents have become more prevalent in our industry in recent years and the emergence of new AI technologies presents risks of further vulnerabilities. For example, attempts by malicious actors to fraudulently induce our personnel into disclosing usernames, passwords or other information that can be used to access our systems have increased and could be successful.
Such threats have become more prevalent in our industry in recent years and the emergence of new AI technologies presents risks of further vulnerabilities. For example, attempts by malicious actors to fraudulently induce our personnel into disclosing usernames, passwords or other information that can be used to access our systems have increased and could be successful.
In addition, we may need to settle litigation and disputes on terms that are unfavorable to us. Although we carry general liability insurance and patent infringement insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.
In addition, we may need to settle litigation and disputes on terms that are unfavorable to us. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.
Create Solutions customers have no obligation to renew their subscriptions, which are primarily one to three years in length, after they expire, and have no obligation to continue using our Grow Solutions, which are primarily sold under revenue-share or profit-share-based models.
Create Solutions customers have no obligation to renew their subscriptions, which are primarily one to five years in length, after they expire, and have no obligation to continue using our Grow Solutions, which are primarily sold under revenue-share or profit-share-based models.
As a result, we may be required to change the way we market our offerings, and any of these developments or changes could materially impair our ability to reach new or existing customers or otherwise negatively affect our operations.
As a result, we have been and may be required to change the way we market our offerings, and any of these developments or changes could materially impair our ability to reach new or existing customers or otherwise negatively affect our operations.
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. • the conditional conversion feature of the Notes, if triggered, may adversely affect our liquidity if we are required to settle a portion or all of our conversion obligation through the payment of cash.
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 feature of 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.
At this time, we do not expect Pillar 2 legislation to have a material impact to our consolidated financial statement; • changes to our assessment of our ability to realize our deferred tax assets that are based on estimates of our future results, the feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
At this time, we do not expect Pillar Two legislation to have a material impact to our consolidated financial statements; • changes to our assessment of our ability to realize our deferred tax assets that are based on estimates of our future results, the feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
These failures on our part may lead to our customers being confused about use of our offerings or expected technology releases, and our ability to grow our business, results of operations, brand and reputation may be adversely affected.
These failures may lead to our customers being confused about use of our offerings or expected technology releases, and our ability to grow our business, results of operations, brand and reputation may be adversely affected.
In particular, operating system platform providers or application stores such as Apple or Google may change their technical requirements or policies in a manner that adversely impacts the way in which we or our customers offer solutions or collect, use, and share data from end-user devices.
In particular, operating system platform providers or application stores such as Apple or Google have in the past and may in the future change their technical requirements or policies in a manner that adversely impacts the way in which we or our customers offer solutions or collect, use, and share data from end-user devices.
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.
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. 5 Table of Contents Unity Software Inc.
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.
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.
In addition to the other risks described herein, factors that may affect our results of operations include the following: • fluctuations in demand for, usage of, or pricing of our platform; • changes in mix of solutions purchased by our customers; • demand for our gaming customers' products and their ability to monetize those products, which in turn can have a significant impact on our revenue-share and consumption-based solutions; • timing and amount of our investments to expand the capacity of our third-party cloud hosting providers; • seasonality, especially with respect to our Grow Solutions, which tend to generate higher revenue during periods of increased time spent on entertainment, such as holidays; • downturns or upturns in our sales which may not be immediately reflected in our financial position and results of operations; • timing of customer budget cycles, purchases--including longer sales cycles for enterprise customers--and usage of our platform; • market conditions and risks associated with the gaming industry, including the popularity, price and timing of release of games, changes in consumer demographics, the availability and popularity of other forms of entertainment, public tastes and preferences; • timing of updates and new features on our platform; • fluctuations or delays in purchasing decisions in anticipation of new solutions or enhancements by us or our competitors; • amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions, many of which occur in advance of the anticipated benefits resulting from such expenses; • amount and timing of non-cash expenses, including stock-based compensation, amortization of acquired intangibles and acquisition-related expenses; • amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees; • timing of acquisitions and costs associated with integrating acquired companies; • general economic, social and public health conditions, both domestically and globally, including uncertain macroeconomic conditions, as well as conditions specifically affecting industries in which our customers operate, which can impact customer spending and result in longer deal cycles; • incorrect estimates or judgments relating to our critical accounting policies; • impact of new accounting pronouncements or changes in accounting principles; • costs that we incur in order to comply with changing regulatory, tax or legal requirements, especially with respect to privacy and security matters; and • significant security breaches of, technical difficulties with or interruptions to the delivery and use of our platform.
In addition to the other risks described herein, factors that may affect our results of operations include the following: • fluctuations in demand for, usage of, or pricing of our platform; • changes in mix of solutions purchased by our customers; • demand for our gaming customers' products and their ability to monetize those products, which in turn can have a significant impact on our revenue-share and consumption-based solutions; • timing and amount of our investments to expand the capacity of our third-party cloud hosting providers; • seasonality, especially with respect to our Grow Solutions, which tend to generate higher revenue during periods of increased time spent on entertainment, such as holidays; • downturns or upturns in our sales which may not be immediately reflected in our financial position and results of operations; • timing of customer budget cycles, purchases--including longer sales cycles for enterprise customers--and usage of our platform; • market conditions and risks associated with the gaming industry, including the popularity, price and timing of release of games, changes in consumer demographics, the availability and popularity of other forms of entertainment, public tastes and preferences; • timing of updates and new features on our platform; • fluctuations or delays in purchasing decisions in anticipation of new solutions or enhancements by us or our competitors; • amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions, many of which occur in advance of the anticipated benefits resulting from such expenses; • amount and timing of non-cash expenses, including stock-based compensation, amortization of acquired intangibles and acquisition-related expenses; • amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees; • timing of acquisitions and costs associated with integrating acquired companies; • uncertain macroeconomic conditions, including changing international trade relations, as well as conditions specifically affecting industries in which our customers operate, which can impact customer spending and result in longer deal cycles; • incorrect estimates or judgments relating to our critical accounting policies; • impact of new accounting pronouncements or changes in accounting principles; • costs that we incur in order to comply with changing regulatory, tax or legal requirements, especially with respect to AI, privacy and security matters; and 10 Table of Contents Unity Software Inc. • significant security breaches of, technical difficulties with or interruptions to the delivery and use of our platform.
We are increasingly building AI into certain of our offerings, such as Unity Muse, an expansive platform for AI-driven assistance during creation, and Unity Sentis, which allows creators to embed an AI model in the Unity Runtime for their game or application, enhancing gameplay and other functionality.
We are increasingly building AI into certain of our offerings, such as Vector, our new machine-learning model, Unity Muse, an expansive platform for AI-driven assistance during creation, and Unity Sentis, which allows creators to embed an AI model in the Unity Runtime for their game or application, enhancing gameplay and other functionality.
The market in which we compete is 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.
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.
Revenue growth from our offerings depends on our ability to continue to develop and offer effective features and functionality for our customers and to respond to frequently changing privacy and data security laws and regulations, policies, and end-user demands and expectations, which will require us to incur additional costs to implement.
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.
The counterparties and/or 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 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 2026 Notes).
The 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 34 Table of Contents Unity Software Inc. common stock or other securities of ours in secondary market transactions prior to the maturity of 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 2026 Notes).
For example, we may also be subject to the Payment Card Industry Data Security Standard ("PCI DSS"), which requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
For example, we are subject to the Payment Card Industry Data Security Standard ("PCI DSS"), which requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of customers accessing our platform simultaneously, denial of service attacks or other security-related incidents. 16 Table of Contents Unity Software Inc.
We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of customers accessing our platform simultaneously, denial-of-service attacks or other security-related incidents.
In addition, the California Consumer Privacy Act ("CCPA"), which applies to personal information of consumers, business representatives, employees, and other individuals with whom we interact, imposes a number of obligations on covered businesses, including requirements to respond to requests from California residents related to their personal information. The CCPA contains significant potential penalties for noncompliance (up to $7,500 per violation).
In addition, the California Consumer Privacy Act ("CCPA"), which applies to personal information of consumers, business representatives, employees, and other individuals with whom we interact, imposes a number of obligations on covered businesses, including requirements to respond to requests from California residents related to their personal information. The CCPA contains significant potential penalties for noncompliance.
Additionally, when we announce or release new versions of our platform or advancements in our technology, we could fail to sufficiently explain or train our customers on how to use such new versions or advancements or we may announce or release such versions prematurely.
Additionally, when we announce or release new versions of our platform or advancements in our technology, such as Unity 6, we could fail to sufficiently explain or train our customers on how to use such new versions or advancements or we may announce or release such versions prematurely.
Third-party platforms are constantly evolving, and we may not be able to modify our solutions to assure compatibility with that of other third parties following development changes within a timely manner. For example, third- 20 Table of Contents Unity Software Inc. party platforms frequently deploy updates to their hardware or software and modify their system requirements.
Third-party platforms are constantly evolving, and we may not be able to modify our solutions to assure compatibility with that of other third parties following development changes within a timely manner. For example, third-party platforms frequently deploy updates to their hardware or software and modify their system requirements.
If we do not effectively expand our direct sales capabilities to address these industries effectively or develop effective sales and marketing strategies for those industries, or if we focus our efforts on non-gaming 11 Table of Contents Unity Software Inc. industries that end up being slow adopters of our platform and solutions, our ability to increase sales of our platform and solutions to industries and for use cases outside gaming will be adversely affected.
If we do not effectively expand our direct sales capabilities to address these industries effectively or develop effective sales and marketing strategies for those industries, or if we focus our efforts on non-gaming industries that end up being slow adopters of our platform and solutions, our ability to increase sales of our platform and solutions to industries and for use cases outside gaming will be adversely affected.
Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of 36 Table of Contents Unity Software Inc. internal control over financial reporting.
Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of internal control over financial reporting.
We have a limited history operating our business at its current scale, and as a result, our past results may not be indicative of future operating performance. We have a limited history operating our business at its current scale and scope. You should not rely on our past results of operations as indicators of future performance.
We have a limited history operating our business at its current scale and scope. You should not rely on our past results of operations as indicators of future performance.
Our products and services are subject to export controls and economic sanctions laws and regulations of the United States and potentially other jurisdictions in which we have operations. Compliance with such laws and regulations can be time-consuming and may result in the delay or loss of sales opportunities.
Our products and services are subject to export controls and economic sanctions laws 29 Table of Contents Unity Software Inc. and regulations of the United States and potentially other jurisdictions in which we have operations. Compliance with such laws and regulations can be time-consuming and may result in the delay or loss of sales opportunities.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition. 36 Table of Contents Unity Software Inc.
Because there are many different cybercrime and hacking techniques and such techniques continue to evolve, we may be unable to anticipate attempted security breaches, react in a timely or effective manner or implement adequate preventative measures.
Because there are many different cybercrime and hacking techniques and such techniques continue to evolve, we have in the past been and may in the future be unable to anticipate attempted security breaches, react in a timely or effective manner or implement adequate preventative measures.
For example, such failures have in the past led to customers expressing frustration with our platform on social media and other internet sites. Interruptions, performance problems, or defects associated with our platform may adversely affect our business, financial condition, and results of operations.
For example, such failures have in the past led to customers expressing frustration with our platform on social media and other internet sites. 16 Table of Contents Unity Software Inc. Interruptions, performance problems, or defects associated with our platform may adversely affect our business, financial condition, and results of operations.
The successful assertion of one or more large claims against us that 19 Table of Contents Unity Software Inc. exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations.
Our actual or perceived noncompliance with these and other emerging state laws could harm our business. We also use AI, including generative AI, and ML technologies in our products and services. The development and use of AI/ML present various privacy and data security risks that may impact our business.
Our actual or perceived noncompliance with these and other emerging state laws could harm our business. 26 Table of Contents Unity Software Inc. We also use AI, including generative AI, and ML technologies in our products and services. The development and use of AI/ML present various privacy and data security risks that may impact our business.
In addition, we will need to appropriately scale our internal business, IT, and financial, operating and administrative systems to serve our growing customer base, while continuing to manage headcount, capital and operating and reporting processes, and continue to integrate them with ironSource's, in an efficient manner.
In addition, we will need to appropriately scale our internal business, IT, and financial, operating and administrative systems to serve our growing customer base, while continuing to manage headcount, capital and operating and reporting processes in an efficient manner.
Market opportunity estimates and growth forecasts, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that affect the calculation of our market opportunity are also subject to change over time. 7 Table of Contents Unity Software Inc.
Market opportunity estimates and growth forecasts, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that affect the calculation of our market opportunity are also subject to change over time.
While we have developed systems and processes designed to protect the integrity, confidentiality and security of our and our customers' confidential, proprietary, and personal information under our control, we cannot assure you that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats.
While we have developed systems and processes designed to protect the integrity, confidentiality and security of our and our customers' confidential, proprietary, and personal information under our control or under the control of third parties with whom we work, we cannot assure you that any security measures that we or our third-party service providers have implemented has been or will in the future be effective against current or future security threats.
We invest in targeted sales and account-based marketing efforts to identify opportunities to grow use of our solutions within and across multiple studios within a 6 Table of Contents Unity Software Inc. single customer. However, our efforts may not be successful despite the resources we devote to them.
We invest in targeted sales and account-based marketing efforts to identify opportunities to grow use of our solutions within and across multiple studios within a single customer. However, our efforts may not be successful despite the resources we devote to them.
Various countries in which we operate regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could 29 Table of Contents Unity Software Inc. limit our ability to distribute our solutions or could limit our customers' ability to implement our solutions in those countries.
Various countries in which we operate regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our solutions or could limit our customers' ability to implement our solutions in those countries.
Our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster. In addition, certain of our operations could be impacted by militarization or war, discussed below.
Our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster. In addition, certain of our operations could be impacted by 12 Table of Contents Unity Software Inc. militarization or war, discussed below.
If we or our third-party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers' data, our data, or our platform, our platform may be perceived as not secure, our reputation may be harmed, our business operations may be disrupted, demand for our solutions may be reduced, and we may incur significant liabilities.
If we or the third parties with whom we work experience a security breach or unauthorized parties otherwise obtain access to our customers' data, our data, or our platform, our platform may be perceived as not secure, our reputation may be harmed, our business operations may be disrupted, demand for our solutions may be reduced, and we may incur significant liabilities.
If we are unable to also serve the needs of advertisers, they may reduce their consumption of our solutions and, because the advertising market is highly competitive, they may shift their business to other advertising solutions or supply paths, which could adversely affect our revenue. All of our offerings are also subject to factors and events beyond our control.
If we are unable to also serve the needs of advertisers, they may reduce their consumption of our solutions and, because the advertising market is highly competitive, they may shift their business to other advertising solutions or supply paths, which could adversely affect our revenue.
We utilize a direct sales organization to increase adoption within larger enterprise customers and to expand into new industries, such as automotive, where potential customers are typically larger organizations. In particular, our success for our Grow Solutions depends in part on larger enterprise customers.
We utilize a direct sales organization to increase adoption within larger enterprise customers and to expand into new industries, such as automotive, where potential customers are typically larger 11 Table of Contents Unity Software Inc. organizations. In particular, our success for our Grow Solutions depends in part on larger enterprise customers.
We currently have operations and customers across all major global markets. We also have a sales presence in multiple countries. We expect that our global activities will continue to grow for the foreseeable future as we continue to pursue growth opportunities, which will require significant dedication of management attention and financial resources.
We also have a sales presence in multiple countries. We expect that our global activities will continue to grow for the foreseeable future as we continue to pursue growth opportunities, which will require significant dedication of management attention and financial resources.
If our customers fail to create or operate popular games using our platform, and we are not able to maintain a diversified portfolio of "winners and losers," our results of operations may be adversely affected.
If our 9 Table of Contents Unity Software Inc. customers fail to create or operate popular games using our platform, and we are not able to maintain a diversified portfolio of "winners and losers," our results of operations may be adversely affected.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be 9 Table of Contents Unity Software Inc. indicative of our future performance.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance.
If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits. 10 Table of Contents Unity Software Inc.
If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.
We intend to continue to make investments to support our business and may require additional funds to respond to business challenges, including the need to develop new solutions, products, services or enhance our existing solutions, products or services, enhance our operating infrastructure, expand globally and acquire complementary businesses and technologies.
We intend to continue to make investments to support our business and may require additional funds to respond to business challenges, including the need to develop new solutions, products, services or enhance our existing solutions, products or services, enhance our operating infrastructure, expand globally and acquire complementary businesses and 15 Table of Contents Unity Software Inc. technologies.
These third-party providers may not have adequate security measures and have experienced and could experience in the future security incidents that compromise the confidentiality, integrity or availability of the systems they operate for us or the information they process on our behalf.
Our ability to monitor these third parties' information security practices is limited and these third-party providers may not have adequate security measures and have experienced and could experience in the future security incidents that compromise the confidentiality, integrity or availability of the systems they operate for us or the information they process on our behalf.
Enforcement of longstanding privacy laws, such as the Children's Online Privacy Protection Act ("COPPA"), has increased and may continue under the new generation of privacy and data security laws and regulations, such as the GDPR, CCPA, the UK's Information Commissioner's Office Age-Appropriate Design Code ("Children's Code"), and the California Age-Appropriate Design Code Act ("Design Code").
Enforcement of longstanding privacy laws, such as the Children's Online Privacy Protection Act ("COPPA"), has increased and may continue under the new generation of privacy and data security laws and regulations, such as the GDPR, CCPA, the UK's Information Commissioner's Office Age-Appropriate Design Code ("Children's Code"), and the California Age-Appropriate Design Code Act ("Design Code"), and similar laws enacted by other U.S. states.
For example, the cross-border transfer landscape in Europe remains unstable despite an agreement between the U.S. and Europe, and other countries outside of Europe have enacted or are considering enacting cross border data transfer restrictions and laws requiring data residency.
In addition, certain jurisdictions may enact or have already enacted data localization cross-border data transfer laws. For example, the cross-border data transfer landscape in Europe remains unstable despite an agreement between the U.S. and Europe, and other countries outside of Europe have enacted or are considering enacting cross border data transfer restrictions and laws requiring data residency.
Market acceptance of our platform in industries beyond gaming may not grow as we expect and if our platform does not achieve widespread adoption in these other markets, our ability to grow our revenue may suffer. 8 Table of Contents Unity Software Inc.
Market acceptance of our platform in industries beyond gaming may not grow as we expect and if our platform does not achieve widespread adoption in these other markets, our ability to grow our revenue may suffer.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties with whom we work.
For example, our revenue growth in the first half of 2022 was negatively impacted by challenges with certain of our Grow Solutions (including a fault in our platform that resulted in reduced accuracy of one of our monetization tools, as well as the consequences of ingesting bad data from a large customer) that reduced the efficacy of such products.
For example, in the first half of 2022, we experienced challenges with certain of our Grow Solutions (including a fault in our platform that resulted in reduced accuracy of one of our monetization tools, as well as the consequences of ingesting bad data from a large customer) that reduced the efficacy of such products.
Similarly, we and our customers also rely on our solutions' interoperability with third-party platforms in order to deliver services. Currently, we support and have strategic partnerships with over 20 such platforms.
Similarly, we and our customers also rely on our solutions' interoperability with third-party platforms in order to deliver 20 Table of Contents Unity Software Inc. services. Currently, we support and have strategic partnerships with over 20 such platforms.
In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
In addition, at the state level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state 31 Table of Contents Unity Software Inc. taxes owed.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including Pillar One and Pillar Two related taxes as proposed by the OECD and which are being implemented by many jurisdictions in which we operate beginning in 2024.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including Pillar One and Pillar Two related taxes as proposed by the Organization for Economic Co-operation and Development (the "OECD") and which began to be implemented by many jurisdictions in which we operate in 2024.
The evolving regulatory landscape and our product development efforts may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results.
The evolving regulatory landscape and our product development efforts may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical 17 Table of Contents Unity Software Inc. concerns, or other complications that could adversely affect our business, reputation, or financial results.
AI/ML are subject to privacy and data security laws, as well as increasing regulation and scrutiny. Several jurisdictions worldwide, including Europe and certain U.S. states, have proposed or 26 Table of Contents Unity Software Inc. enacted laws governing AI/ML.
AI/ML are subject to privacy and data security laws, as well as increasing regulation and scrutiny. Several jurisdictions worldwide, including Europe and certain U.S. states, have proposed or enacted laws governing AI/ML.
In addition, we may continue to make investments in such areas as: • research and development, including investments in our engineering teams and in further differentiating our platform and solutions with improvements to our Create and Grow Solutions, as well as the development of new solutions and features; • our sales and marketing organizations to engage our existing and prospective customers, increase brand awareness and drive adoption and expansion of our platform and solutions; • research and development and sales and marketing initiatives to grow our presence in new industries and use cases beyond the gaming industry; • our technology infrastructure, including systems architecture, scalability, availability, performance, and security; • acquisitions or strategic investments; • global expansion; and • our general and administration organization, including legal, IT, and accounting expenses associated with ongoing public company compliance and reporting obligations, including maintaining proper and effective internal controls over financial reporting.
In addition, we may continue to make investments in such areas as: • research and development, including investments in our engineering teams and in further differentiating our platform, as well as the development of new solutions and features; • our sales and marketing organizations to engage our existing and prospective customers, increase brand awareness and drive adoption and expansion of our platform and solutions; • initiatives to grow our presence in new industries and use cases beyond the gaming industry; • our technology infrastructure, including systems architecture, scalability, availability, performance, and security; • acquisitions or strategic investments; • global expansion; and • our general and administration organization, including legal, IT, and accounting expenses.
Any limitation on or discontinuation of our or our customers' access to any third-party platform or application store could adversely affect our business, financial condition, or results of operations.
Any limitation on or discontinuation of our or our customers' access to any third-party platform or application store could adversely affect our business, financial condition, or results of operations. 8 Table of Contents Unity Software Inc.
In addition, we may need to take other measures that would impact our liquidity. For example, under certain conditions we may be required to repurchase the third-party interest in Unity China, which would impact our liquidity.
For example, under certain conditions we may be required to repurchase the third-party interest in Unity China, which would impact our liquidity.
We expect to invest significant research and development resources to develop and expand our solutions' functionality to meet the needs of customers in these industries, and we will need to increase our sales and marketing, legal and compliance and other efforts as we seek to expand into new industries that require a different go-to-market strategy than the gaming industry.
We expect to invest in sales and marketing resources to develop and expand the use of our solutions by customers in these industries, and we will need to increase our sales and marketing, legal and compliance and other efforts as we seek to expand into new industries that require a different go-to-market strategy than the gaming industry.
We rely on payments from advertisers in order to pay our Grow Solutions customers their revenue earned from Unity Ads, LevelPlay, and Sonic. We are generally obligated to pay our customers for revenue earned within a negotiated period of time, regardless of whether or not our advertisers have paid us on time, or at all.
We rely on payments from advertisers in order to pay our Grow Solutions customers their revenue earned from our Monetization solutions. We are generally obligated to pay our customers for revenue earned within a 14 Table of Contents Unity Software Inc. negotiated period of time, regardless of whether or not our advertisers have paid us on time, or at all.
Our customers rely on our sales, customer success and customer support personnel and tools to resolve issues and realize the full benefits that our platform provides. High-quality support is important for the retention of our existing customers and expanding their use of our platform.
If we fail to offer high-quality support, our ability to retain and attract customers could suffer. Our customers rely on our sales, customer success and customer support personnel and tools to resolve issues and realize the full benefits that our platform provides. High-quality support is important for the retention of our existing customers and expanding their use of our platform.
We and the third parties upon which we rely are subject to a variety of constantly evolving threats, including but not limited to, computer malware (including as a result of advanced persistent threat intrusions), software bugs and vulnerabilities, malicious code, viruses and worms, social engineering (including spear phishing and ransomware attacks), denial-of-service attacks (such as credential stuffing attacks), credential harvesting, personnel misconduct or error, supply chain attacks server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, and other similar threats.
We and the third parties with whom we work are subject to a variety of constantly evolving threats, including but not limited to, computer malware (including as a result of advanced persistent threat intrusions), software bugs and vulnerabilities, malicious code, viruses and worms, social engineering (including through deep fakes, which are increasingly more difficult to identify as fake, spear phishing and ransomware attacks), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, supply chain attacks server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, attacks enhanced or facilitated by AI and other similar threats.
In the third quarter of 2023 we announced changes to our pricing model for our Create Solutions, which will become effective for users of the next major release of the software expected to be available in 2024.
We periodically review our pricing structures and business models and in the third quarter of 2023 we announced changes to our pricing model for our Create Solutions, which were to become effective for users of the next major release of the software expected to be available in 2024.
Competition is intense, particularly in the San Francisco Bay Area, Tel Aviv, and other areas in which we have offices, for engineers experienced in designing and developing cloud-based platform solutions, data scientists with experience in machine learning and artificial intelligence and experienced sales professionals.
Competition is intense, particularly in the San Francisco Bay Area, Tel Aviv, and other areas in which we have offices, for engineers experienced in designing and developing cloud-based platform solutions, data scientists and machine learning engineers with experience in machine learning and artificial intelligence and experienced sales professionals. New hires require training and take time before they achieve full productivity.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur approach to cybersecurity is integrated into our overall company-wide approach to risk management, including that our management team, including our Chief Security Officer and Data Privacy Officer, evaluates material risks from cybersecurity threats against our overall business objectives and regularly reports to both the Audit Committee of our board of directors and to our internal audit function which evaluates our overall enterprise risk.
Biggest changeOur management team, including our Deputy Chief Security Officer and our Data Privacy Officer, evaluates risks from cybersecurity threats against our overall business objectives and regularly reports to both the Audit Committee of our board of directors and to our internal audit function which evaluates our overall enterprise risk.
Our Chief Security Officer and Data Privacy Officer oversee our assessment, prevention, detection and management of cybersecurity risks, and report to our executive team, including our Chief Information Officer, Chief Financial Officer and Chief Legal Officer.
Our Deputy Chief Security Officer and Data Privacy Officer oversee our assessment, prevention, detection and management of cybersecurity risks, and report to our executive team, including our Chief Information Officer, Chief Financial Officer and Chief Legal Officer.
In 2023, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. Despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents. Refer to "Item 1A.
In 2024, we did not identify any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. Despite our efforts, we cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced undetected cybersecurity incidents. Refer to "Item 1A.
We engage third party services in connection with our processes for vendor security reviews and incidents. We are continuing to develop our processes to oversee and identify the risks from cybersecurity threats associated with our use of any third-party service provider.
We engage third party services in connection with our processes for vendor security reviews and incidents. We are continuing to refine our processes to oversee and identify the risks from cybersecurity threats associated with our use of any third-party service provider.
Our security team follows an incident response process which we are continuing to evaluate and enhance. Pursuant to this process, incidents which may result in economic loss to the company, reputational harm or require notifications to individuals and government authorities are reported to our executive team as they are occurring.
Our security team follows an incident response process which we are continuing to evaluate and enhance. Pursuant to this process, incidents which may result in economic loss to the company, reputational harm or require notifications to individuals and government authorities are reported to our executive team.
Our Chief Security Officer Security has over 25 years of experience in multiple business verticals and has led security organizations and managed global practices for Fortune 500 technology companies. He became our Chief Security Officer earlier this year after previously serving in that role at ironSource, prior to its merger with us.
Our Deputy Chief Security Officer Security has over 25 years of experience in multiple business verticals and has led security organizations and managed global practices for Fortune 500 technology companies. He became our Deputy Chief Security Officer after previously serving in that role at ironSource, prior to its merger with us.
Countries around the world have adopted or are proposing similar laws and regulations relating to privacy and data security, and we may become subject to them as we expand our operations into new geographic markets.
Countries around the world have adopted or are proposing similar laws and regulations relating to privacy and data security, and we may become subject to them as we expand our operations into new geographic markets. 37 Table of Contents Unity Software Inc.
Risk Factors" for a description of the risks from cybersecurity threats that may materially affect the Company, including the risk factor titled, "If we or our third-party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers' data, our data, or our platform, our platform may be perceived as not secure, our reputation may be harmed, our business operations may be disrupted, demand for our solutions may be reduced, and we may incur significant liabilities". 38 Table of Contents Unity Software Inc.
Risk Factors" for a description of the risks from cybersecurity threats that may materially affect the Company, including the risk factor titled, "If we or the third parties with whom we work experience a security breach or unauthorized parties otherwise obtain access to our customers' data, our data, or our platform, our platform may be perceived as not secure, our reputation may be harmed, our business operations may be disrupted, demand for our solutions may be reduced, and we may incur significant liabilities".
Unity personnel are provided annual privacy training, with additional targeted training for key participants in our privacy program. We have procedures in place to 37 Table of Contents Unity Software Inc. address suspected personal-data breaches and notify users determined to be affected and applicable regulator of a breach where we are legally required to do so.
Unity personnel are provided annual privacy training, with additional targeted training for key participants in our privacy program. We have procedures in place to address suspected security breaches and notify users determined to be affected and applicable regulators of a breach where we are legally required to do so.
Our risk management process includes employee education and annual analysis of risks from across the company, which are then prioritized for remediation.
Our risk management process includes employee education and annual analysis of risks from across the company, which are then prioritized for remediation. Our approach to cybersecurity is integrated into our overall company-wide approach to risk management.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters are located in San Francisco, California, where we lease approximately 53,000 square feet of space in two buildings with leases that expire in August 2025. Currently, our largest office is located in Montreal, Canada with approximately 170,000 square feet under a lease that expires in June 2030.
Biggest changeItem 2. Properties Our corporate headquarters are located in San Francisco, California, where we lease approximately 53,000 square feet of space under a lease that expires in August 2025. Currently, our largest office is located in Montreal, Canada, with approximately 188,000 square feet under a lease that expires in June 2030.
Our next largest office is located in Tel Aviv, Israel with approximately 139,000 square feet under a lease that expires in June 2027. In addition, we maintain offices in various states in the United States, across Europe, Asia and Latin America. Item 3.
Our next largest office is located in Shanghai, China, with approximately 146,000 square feet under a lease that expires in July 2027. In addition, we maintain offices in various states in the United States, across Europe, Asia and Latin America. Item 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCompany/Index 9/18/2020 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Unity Software Inc. $ 100 $ 47 $ 42 $ 47 $ 64 $ 46 $ 60 S&P 500 Information Technology Index $ 100 $ 106 $ 111 $ 134 $ 157 $ 148 $ 173 Nasdaq 100 Technology Sector $ 100 $ 93 $ 93 $ 116 $ 131 $ 129 $ 156 Item 6. [RESERVED]
Biggest changeCompany/Index 9/18/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Unity Software Inc. $ 100 $ 225 $ 209 $ 42 $ 60 $ 33 S&P 500 Information Technology Index $ 100 $ 117 $ 156 $ 111 $ 173 $ 235 Nasdaq 100 Technology Sector $ 100 $ 116 $ 155 $ 93 $ 156 $ 167 Item 6. [RESERVED]
The performance graph below compares (i) the cumulative total return on our common stock from September 18, 2020 (the date our common stock commenced trading on the New York Stock Exchange) through December 31, 2023 with (ii) the cumulative total return of the S&P 500 Information Technology Index ("SP500-45") and the Nasdaq 100 Technology Sector ("NDXT") Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on September 18, 2020 and the reinvestment of dividends.
The performance graph below compares (i) the cumulative total return on our common stock from September 18, 2020 (the date our common stock commenced trading on the New York Stock Exchange) through December 31, 2024 with (ii) the cumulative total return of the S&P 500 Information Technology Index ("SP500-45") and the Nasdaq 100 Technology Sector ("NDXT") Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on September 18, 2020 and the reinvestment of dividends.
The performance graph uses the closing market price on September 18, 2020 of $68.35 per share as the initial value of our common stock. The stock price performance on this performance graph is not necessarily indicative of future stock price performance. 40 Table of Contents Unity Software Inc.
The performance graph uses the closing market price on September 18, 2020 of $68.35 per share as the initial value of our common stock. The stock price performance on this performance graph is not necessarily indicative of future stock price performance. 39 Table of Contents Unity Software Inc.
Holders of Record As of December 31, 2023, we had 440 stockholders of record of our common stock, including brokers and other institutions, which hold shares of our common stock on behalf of an indeterminate number of beneficial holders. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
Holders of Record As of December 31, 2024, we had 384 stockholders of record of our common stock, including brokers and other institutions, which hold shares of our common stock on behalf of an indeterminate number of beneficial holders. Dividend Policy We have never declared or paid any cash dividends on our capital stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur total revenue is summarized as follows (in thousands): Year Ended December 31, 2023 2022 2021 Create Solutions $ 859,174 $ 716,078 $ 506,920 Grow Solutions 1,328,143 674,946 603,606 Total revenue $ 2,187,317 $ 1,391,024 $ 1,110,526 The increase in total revenue for the year ended December 31, 2023, compared to the comparable prior year period, was primarily due to the acquisition and inclusion of revenue from ironSource within Grow Solutions.
Biggest changeOur total revenue is summarized as follows (in thousands): Year Ended December 31, 2024 2023 2022 Create Solutions $ 613,966 $ 859,174 $ 716,078 Grow Solutions 1,199,289 1,328,143 674,946 Total revenue $ 1,813,255 $ 2,187,317 $ 1,391,024 Total revenue decreased in the year ended December 31, 2024, compared to the comparable prior year period, primarily due to a decrease in Create Solutions revenue, primarily due to the termination of the subscription agreement with Wētā FX Limited, which includes approximately $99 million of incremental revenue in the fourth quarter of 2023 from terminating Wētā FX Limited's subscription rights in exchange for a perpetual license; and a decrease in professional services revenue, and consumption services revenue, both caused by the portfolio reset.
Sales and Marketing Our sales and marketing expenses consist primarily of personnel-related costs, 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, and amortization expenses related to intangible assets.
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.
Some of these limitations are: • it is not a substitute for net cash (used in) provided by operating activities; • other companies may calculate free cash flow or similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison; and • the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.
Some of these limitations are: • it is not a substitute for net cash provided by operating activities ; • other companies may calculate free cash flow or similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison; and • the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.
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 sold separately from the Create Solutions subscriptions.
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 Solutions subscriptions.
Our cash flows fluctuate from period to period due to revenue seasonality, timing of billings, collections, and publisher payments. Historical cash flows are not necessarily indicative of our results in any future period.
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.
Some of these limitations are: • they exclude expense associated with our equity compensation plans, although equity compensation has been, and will continue to be, an important part of our compensation strategy; • adjusted gross profit and adjusted EBITDA excludes the expense of amortization of acquired intangible assets and depreciation of property and equipment, and although these are non-cash expenses, the assets being amortized may have to be replaced in the future and adjusted gross profit and adjusted EBITDA does not reflect cash expenditure for such replacements; • adjusted EBITDA excludes costs incurred from our acquisitions, and in connection with the formation of Unity China; • adjusted gross profit and adjusted EBITDA excludes costs incurred from restructuring activities; • adjusted EBITDA excludes costs incurred from legal settlements that we anticipate recovering through insurance, and subsequent recoveries of those amounts; • the expenses and other items that we exclude in our calculation of adjusted gross profit and adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from this measure or similarly titled measures, which reduces their usefulness as comparative measures.
Some of these limitations are: • they exclude expense associated with our equity compensation plans, although equity compensation has been, and will continue to be, an important part of our compensation strategy; • adjusted gross profit and adjusted EBITDA excludes the expense of amortization of acquired intangible assets and depreciation of property and equipment, and although these are non-cash expenses, the assets being amortized may have to be replaced in the future and adjusted gross profit and adjusted EBITDA does not reflect cash expenditure for such replacements; • adjusted EBITDA excludes costs incurred from our acquisitions; • adjusted gross profit and adjusted EBITDA excludes costs incurred from restructuring activities; • adjusted EBITDA excludes costs incurred from legal settlements that we anticipate recovering through insurance, and subsequent recoveries of those amounts; • the expenses and other items that we exclude in our calculation of adjusted gross profit and adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from this measure or similarly titled measures, which reduces their usefulness as comparative measures.
Our material cash requirements from known contractual and other obligations consists of our convertible notes, obligations under operating leases for office space, and contractual obligations for hosting services to support our business operations. See Item 8 of Part II, "Financial Statements and Supplementary Data — Note 10 — Commitments and Contingencies" for additional discussion of our principal contractual commitments.
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 Item 8 of Part II, "Financial Statements and Supplementary Data — Note 10 — Commitments and Contingencies" for additional discussion of our principal contractual commitments.
We consider the embedded cloud functionality to be a separate performance obligation, however, its pattern of performance aligns with the software and software updates, which enables us to treat the subscription agreements as one performance obligation that is recognized ratably over the term of the agreement. 52 Table of Contents Unity Software Inc.
We consider the embedded cloud functionality to be a separate performance obligation, however, its pattern of performance aligns with the software and software updates, which enables us to treat the subscription agreements as one performance obligation that is recognized ratably over the term of the agreement. 51 Table of Contents Unity Software Inc.
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. 51 Table of Contents Unity Software Inc.
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. 50 Table of Contents Unity Software Inc.
Customers Contributing More Than $100,000 of Revenue We focus on the number of customers that generated more than $100,000 of revenue in the trailing 12 months, as this segment of our customer base represents the majority of our revenue. We define a customer as an individual or entity that generated revenue during the measurement period.
Customers Contributing More Than $100,000 of Revenue We focus on the number of customers that generated more than $100,000 of revenue in our Strategic Portfolio, in the trailing 12 months, as this segment of our customer base represents the majority of our revenue. We define a customer as an individual or entity that generated revenue during the measurement period.
Provision for Income Taxes Provision for 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 NOL carryforwards and tax credits related primarily to research and development.
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 NOL carryforwards and tax credits related primarily to research and development.
We expect our gross profit to increase in absolute dollars in the long term but decrease in the short term as we reset our product portfolio to focus on the Unity Engine and Monetization solutions. We expect our gross profit as a percentage of revenue, or gross margin, to fluctuate from period to period.
We expect our gross profit to increase in absolute dollars in the long term but decrease in the short term as we reset our product portfolio to focus on the Unity Engine and related consumption services, and Monetization solutions. We expect our gross profit as a percentage of revenue, or gross margin, to fluctuate from period to period.
Discussion of 2021 and year-over-year comparisons between fiscal 2022 and 2021 that are not included in this Form 10-K can be found under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that was filed with the SEC on February 27, 2023, and are incorporated by reference herein. 41 Table of Contents Unity Software Inc.
Discussion of 2022 and year-over-year comparisons between 40 Table of Contents Unity Software Inc. fiscal 2023 and 2022 that are not included in this Form 10-K can be found under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, that was filed with the SEC on February 29, 2024, and are incorporated by reference herein.
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, the amortization of intangible assets, hosting expenses, and depreciation of related property and equipment.
Cost of Revenue, Gross Profit, and Gross Margin Cost of revenue consists primarily of personnel costs (including salaries, benefits, and stock-based compensation) for employees and subcontractors associated with our product support and professional services organizations, hosting expenses, the amortization of intangible assets, and costs of related facilities.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, acquisitions, restructurings and reorganizations, insurance reimbursement for legal expenses, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.
We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock- 47 Table of Contents Unity Software Inc. based compensation, amortization of acquired intangible assets, depreciation, acquisitions, restructurings and reorganizations, insurance reimbursement for legal expenses, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.
Alternatively, we present revenue on a net basis for sales where we are facilitating the transaction between advertisers and publishers and do not have control over in-app placement.
We present revenue on a net basis for sales where we are facilitating the transaction between advertisers and publishers and do not have control over in-app placement. Alternatively, we present revenue on a gross basis for advertising sales where we are the publisher and have control of the in-app placement.
To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in 53 Table of Contents Unity Software Inc. which such determination is made and could have a material impact on our financial condition and operating results.
To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results.
We also incurred restructuring and reorganization expenses of approximately $70 million for the year ended December 31, 2023, of which $52 million related to reductions in our workforce, largely within research and development expense, and $18 million related to 46 Table of Contents Unity Software Inc. our intent to exit certain leased facilities, primarily impairment charges on operating lease assets in general and administrative expense.
We incurred restructuring and reorganization expenses of approximately $70 million for the year ended December 31, 2023, of which $52 million related to reductions in our workforce, largely within research and development expense, and $18 million related to our intent to exit certain leased facilities, primarily impairment charges on operating lease assets in general and administrative expense.
Adjusted Gross Profit and Adjusted EBITDA 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.
Adjusted Gross Profit and Adjusted EBITDA 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 believe that adjusted gross profit and adjusted EBITDA 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. 48 Table of Contents Unity Software Inc.
We believe that adjusted gross profit and adjusted EBITDA 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 sets forth the components of our consolidated statements of operations data as a percentage of revenue for the periods indicated: Year Ended December 31, 2023 2022 2021 Revenue 100 % 100 % 100 % Cost of revenue 34 32 23 Gross profit 66 68 77 Operating expenses Research and development 48 69 63 Sales and marketing 38 36 31 General and administrative 18 27 31 Total operating expenses 104 132 125 Loss from operations (38) (63) (48) Interest expense (1) (1) — Interest income and other expense, net 2 1 — Loss before income taxes (37) (63) (48) Provision for Income taxes 1 3 — Net loss (38) % (66) % (48) % Revenue Create Solutions We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and cloud and hosting services.
The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue for the periods indicated: Year Ended December 31, 2024 2023 2022 Revenue 100 % 100 % 100 % Cost of revenue 27 34 32 Gross profit 73 66 68 Operating expenses Research and development 51 48 69 Sales and marketing 41 38 36 General and administrative 23 18 27 Total operating expenses 115 104 132 Loss from operations (42) (38) (63) Interest expense (1) (1) (1) Interest income and other income (expense), net 6 2 1 Loss before income taxes (37) (37) (63) Provision for (benefit from) Income taxes — 1 3 Net loss (37) % (38) % (66) % 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.
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.
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. 45 Table of Contents Unity Software Inc.
Liquidity and Capital Resources As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents totaling $1.6 billion, which were primarily held for working capital purposes. Our cash equivalents are invested primarily in government money market funds.
Liquidity and Capital Resources As of December 31, 2024, 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 time deposits.
A single organization with multiple divisions, segments, or subsidiaries is generally counted as a single customer, 42 Table of Contents Unity Software Inc. even though we may enter into commercial agreements with multiple parties within that organization. We had 1304, 1340, and 1052 such customers in the trailing 12 months as of December 31, 2023, 2022, and 2021, respectively.
A single organization with multiple divisions, segments, or subsidiaries is generally counted as a single customer, even though we may enter into commercial agreements with multiple parties within that organization. We had 1,254, 1,222, and 1,202 such customers in the trailing 12 months 41 Table of Contents Unity Software Inc. as of December 31, 2024, 2023, and 2022, respectively.
In connection with the ironSource Merger in November 2022, we issued $1.0 billion in aggregate principal amount of 2.0% convertible senior notes due 2027, the proceeds of which were used to fund repurchases under our share repurchase program. We previously issued $1.7 billion in aggregate principal amount of 0% convertible senior notes due 2026 in November 2021.
In connection with the ironSource Merger in November 2022, we issued $1.0 billion in aggregate principal amount of the 2027 Notes, the proceeds of which were used to fund repurchases under our share repurchase program.
Cash Used in Financing Activities During the year ended December 31, 2023, net cash used in financing activities consisted of repurchases and retirement of common stock, offset by the proceeds from the issuance of common stock under our employee equity plans.
Cash Used in Financing Activities During the year ended December 31, 2024, net cash used in financing activities consisted of repayments of convertible notes, offset by the proceeds from the issuance of common stock under our employee equity plans.
We track our performance by measuring our dollar-based net expansion rate, which compares our Create and Grow Solutions revenue, excluding Strategic Partnerships and, starting in the first quarter of 2023, Supersonic, from the same set of customers across comparable periods, calculated on a trailing 12-month basis.
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. Our dollar-based net expansion rate as of a period end is calculated as current period revenue divided by prior period revenue.
While these customers represented the substantial majority of revenue for the years ended December 31, 2023, 2022, and 2021, respectively, no one customer accounted for more than 10% of our revenue for any of those years.
The year over year increase was largely a result of our subscriptions growth. While these customers represented the substantial majority of revenue for the years ended December 31, 2024, 2023, and 2022, respectively, no one customer accounted for more than 10% of our revenue for any of those years.
Through these publishing services, we generate revenue from in-app advertising in published games and in some cases, in app purchase revenue. 45 Table of Contents Unity Software Inc.
Through these publishing services, we generate revenue from in-app advertising in published games and in some cases, in-app purchase revenue.
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): Year Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ 234,700 $ (59,431) Less: Purchases of property and equipment (55,921) (57,138) Free cash flow $ 178,779 $ (116,569) Net cash provided by investing activities $ 44,040 $ 723,228 Net cash used in financing activities $ (174,015) $ (226,634) 50 Table of Contents Unity Software Inc.
The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 315,553 $ 234,700 Less: Purchases of property and equipment (29,549) (55,921) Free cash flow $ 286,004 $ 178,779 Net cash provided by (used in) investing activities $ (42,409) $ 44,040 Net cash used in financing activities $ (338,307) $ (174,015) 49 Table of Contents Unity Software Inc.
The following table presents a reconciliation of our adjusted gross profit to our GAAP gross profit, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Year Ended December 31, 2023 2022 GAAP gross profit $ 1,453,595 $ 948,524 Add: Stock-based compensation expense 80,213 57,271 Amortization of intangible assets expense 243,690 46,942 Depreciation expense 10,480 6,397 Restructuring and reorganization costs 13,510 576 Adjusted gross profit $ 1,801,488 $ 1,059,710 GAAP gross margin 66 % 68 % Adjusted gross margin 82 % 76 % 49 Table of Contents Unity Software Inc.
The following table presents a reconciliation of our adjusted gross profit to our GAAP gross profit, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands): Year Ended December 31, 2024 2023 GAAP gross profit $ 1,332,402 $ 1,453,595 Add: Stock-based compensation expense 43,566 80,213 Amortization of intangible assets expense 108,580 243,690 Depreciation expense 9,613 10,480 Restructuring and reorganization costs 15,154 13,510 Adjusted gross profit $ 1,509,315 $ 1,801,488 GAAP gross margin 73 % 66 % Adjusted gross margin 83 % 82 % 48 Table of Contents Unity Software Inc.
Grow Solutions revenue includes approximately $72 million related to the return of customer incentives issued by ironSource prior to the merger and we do not expect to receive any material amounts in future periods. Grow Solutions revenue was also negatively impacted by increased competition, which we expect will continue in 2024.
The decrease in Grow Solutions revenue was further driven by the return of customer incentives, issued by ironSource prior to the merger, for which we received approximately $72 million of revenue in 2023, and no material amounts in 2024. We do not expect to receive any material amounts related to these customer incentives in any future periods.
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): Year Ended December 31, 2023 2022 GAAP net loss $ (826,322) $ (919,488) Stock-based compensation expense 648,696 537,818 Amortization of intangible assets expense 515,489 172,551 Depreciation expense 48,427 39,025 Acquisition-related costs 888 41,465 Restructuring and reorganization costs 70,373 17,146 Insurance reimbursement for legal settlement (3,250) 3,250 Interest expense 24,580 7,404 Interest income and other expense, net (59,529) (7,192) Income tax expense 28,477 37,063 Adjusted EBITDA $ 447,829 $ (70,958) 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.
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): Year Ended December 31, 2024 2023 GAAP net loss $ (664,287) $ (826,322) Stock-based compensation expense 469,128 648,696 Amortization of intangible assets expense 353,371 515,489 Depreciation expense 55,609 48,427 Acquisition-related costs — 888 Restructuring and reorganization costs 266,855 70,373 Insurance reimbursement for legal settlement — (3,250) Interest expense 23,542 24,580 Interest income and other income (expense), net (111,558) (59,529) Provision for (benefit from) income taxes (2,846) 28,477 Adjusted EBITDA $ 389,814 $ 447,829 Free Cash Flow We define free cash flow as net cash provided by operating activities less cash used for purchases of property and equipment.
Results of Operations The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Revenue $ 2,187,317 $ 1,391,024 $ 1,110,526 Cost of revenue 733,722 442,500 253,630 Gross profit 1,453,595 948,524 856,896 Operating expenses Research and development 1,053,588 959,491 695,710 Sales and marketing 834,625 497,956 344,939 General and administrative 398,176 373,290 347,912 Total operating expenses 2,286,389 1,830,737 1,388,561 Loss from operations (832,794) (882,213) (531,665) Interest expense (24,580) (7,404) (1,131) Interest income and other expense, net 59,529 7,192 1,566 Loss before income taxes (797,845) (882,425) (531,230) Provision for Income taxes 28,477 37,063 1,377 Net loss $ (826,322) $ (919,488) $ (532,607) 44 Table of Contents Unity Software Inc.
Results of Operations The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Revenue $ 1,813,255 $ 2,187,317 $ 1,391,024 Cost of revenue 480,853 733,722 442,500 Gross profit 1,332,402 1,453,595 948,524 Operating expenses Research and development 924,830 1,053,588 959,491 Sales and marketing 752,649 834,625 497,956 General and administrative 410,072 398,176 373,290 Total operating expenses 2,087,551 2,286,389 1,830,737 Loss from operations (755,149) (832,794) (882,213) Interest expense (23,542) (24,580) (7,404) Interest income and other income (expense), net 111,558 59,529 7,192 Loss before income taxes (667,133) (797,845) (882,425) Provision for (benefit from) Income taxes (2,846) 28,477 37,063 Net loss $ (664,287) $ (826,322) $ (919,488) 43 Table of Contents Unity Software Inc.
Interest Expense Interest expense consists primarily of interest expense associated with our convertible debt and amortization of debt issuance costs. Interest expense for the year ended December 31, 2023 increased, compared to the comparable prior year period, due to accrued interest on our 2027 Notes and amortization of debt issuance costs.
Interest Expense Interest expense consists primarily of interest expense associated with our convertible debt and amortization of debt issuance costs. Interest expense for the year ended December 31, 2024 decreased, compared to the comparable prior year period, in line with our outstanding debt obligations.
Cost of revenue for the year ended December 31, 2023 increased, compared to the comparable prior year period, primarily due to an increase of approximately $197 million in amortization expenses related to intangible assets acquired through our business combinations, including $105 million of incremental expense in the fourth quarter of 2023 due to fully amortizing an intangible assets related to the Wētā FX Limited contract that was terminated, as well as higher personnel-related expenses.
Cost of revenue for the year ended December 31, 2024 decreased, compared to the comparable prior year period, primarily due to a decrease in amortization expenses related to intangible assets acquired through our business combinations, which includes $105 million of incremental expenses in the fourth quarter of 2023 from fully amortizing intangible assets related to the Wētā FX Limited contract that was terminated, a decrease in personnel costs, driven by our reductions in headcount, and a decrease in our hosting expenses in line with decreases in related revenue.
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
We use the asset and liability method under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 740, Income Taxes, when accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
We expect research and development expenses to fluctuate as a percentage of revenue from period to period. Research and development expense for the year ended December 31, 2023 increased, compared to the comparable prior year period, primarily due to higher personnel-related, and hosting expenses resulting from the ironSource Merger.
We expect research and development expenses to fluctuate as a percentage of revenue from period to period. Research and development expense for the year ended December 31, 2024 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs driven by our reductions in headcount in the first quarter of 2024.
When observable pricing is not available, we use cost plus margin analysis to determine SSP. For advertisements placed through our Grow Solutions networks, we evaluate whether we are the principal, where revenue would be reported on a gross basis, or the agent, where revenue would be reported on a net basis.
For advertisements placed through our Grow Solutions networks, we evaluate whether we are the principal, where revenue would be reported on a gross basis, or the agent, where revenue would be reported on a net basis. This evaluation of whether to present revenue on a gross or net basis requires significant judgment.
We experienced a high volume of negative customer feedback including a boycott and a slowdown of signing new contracts and renewals as a result of these changes, which we believe negatively impacted our Grow Solutions revenue in the second half of 2023.
In the third quarter of 2023, we announced changes to our pricing model for our Create Solutions. We experienced a high volume of negative customer feedback including a boycott and a slow down of signing new contracts and renewals as a result of these changes.
Research and Development Research and development expenses primarily consist of personnel-related costs for the design and development of our platform, IT hosting and SaaS expenses, and amortization expenses related to intangible assets.
In addition, we incurred approximately $53 million of non-employee charges associated with this restructuring in 2024, largely within research and development expense. Research and Development Research and development expenses primarily consist of personnel-related costs for the design and development of our platform, IT hosting and SaaS expenses, and amortization expenses related to intangible assets.
While we expect a potential benefit from this change over the long term for our business, the ultimate impact on our business remains uncertain.
While the initial customer response to this announcement has been positive and we expect this change to benefit our business over the long term, the ultimate impact remains uncertain.
Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. We use the asset and liability method under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 740, Income Taxes, when accounting for income taxes.
Income Taxes We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.
Our changes in cash flows were as follows (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 234,700 $ (59,431) $ (111,449) Net cash provided by (used in) investing activities 44,040 723,228 (1,837,360) Net cash provided by (used in) financing activities (174,015) (226,634) 1,721,002 Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (6,146) 1,926 459 Net change in cash, cash equivalents, and restricted cash $ 98,579 $ 439,089 $ (227,348) Cash Provided by Operating Activities During the year ended December 31, 2023, net cash provided by operating activities was primarily due to the acquisition and inclusion of operating cash flows from ironSource, and an increase in working capital as our business grows.
Our changes in cash flows were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Net cash provided by (used in) operating activities $ 315,553 $ 234,700 $ (59,431) Net cash provided by (used in) investing activities (42,409) 44,040 723,228 Net cash used in financing activities (338,307) (174,015) (226,634) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (11,223) (6,146) 1,926 Net change in cash, cash equivalents, and restricted cash $ (76,386) $ 98,579 $ 439,089 Cash Provided by Operating Activities During the year ended December 31, 2024, 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.
Sales and marketing expense for the year ended December 31, 2023 increased, compared to the comparable prior year period, primarily due to an increase in amortization expense related to intangible assets acquired through our business acquisitions of approximately $136 million, higher user acquisition costs and higher personnel-related expenses due to the ironSource Merger.
Sales and marketing expense for the year ended December 31, 2024 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs, driven by our reductions in headcount in the first quarter of 2024, and a decrease in amortization expenses related to intangible assets.
See Note 9, "Borrowings," for additional discussion of the Notes. In July 2022, our board of directors approved our share repurchase program, which authorized the repurchase of up to $2.5 billion of shares of our common stock in open market transactions through November 2024 (the "Share Repurchase Program").
In July 2022, our board of directors approved our share repurchase program, which authorized the repurchase of up to $2.5 billion of shares of our common stock in open market transactions, which expired in November 2024. Since our inception, we have generated losses from our operations as reflected in our accumulated deficit of $3.7 billion as of December 31, 2024.
As of December 31, 2023 2022 2021 Dollar-based net expansion rate 104 % 116 % 140 % Our dollar-based net expansion rate as of December 31, 2023, 2022, and 2021 was driven primarily by the sales of additional subscriptions and services to our existing Create Solutions customers and cross-selling our solutions to all of our customers.
Our dollar-based net expansion rate as of December 31, 2022, was driven primarily by increases in Grow Solutions revenue, due in part to the ironSource merger, and growth in subscriptions revenue, and professional services revenue, within Create Solutions.
Cash Provided by Investing Activities During the year ended December 31, 2023, net cash provided by investing activities consisted primarily of proceeds received from the maturities of short-term investments, which was partially offset by purchases of property and equipment.
Cash Used in Investing Activities During the year ended December 31, 2024, net cash used in investing activities consisted primarily of purchases of property and equipment, and purchases of intangible assets.
The chart below illustrates that our dollar-based net expansion rate has been declining over the last year with a slight rebound in the fourth quarter of 2022 due to the ironSource Merger. 43 Table of Contents Unity Software Inc.
The decrease in dollar-based net expansion rate, compared to the comparable prior year periods, is attributable to declines in Grow Solutions, and professional services revenue, as noted above. 42 Table of Contents Unity Software Inc. The chart below illustrates that our dollar-based net expansion rate has been declining over the last year.
Our platform consists of two complementary sets of solutions: Create Solutions and Grow Solutions, which together comprise our strategic portfolio surrounding the Unity Engine, Cloud and Monetization.
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, which together comprise our Strategic Portfolio surrounding the Unity Engine and related consumption services, and Monetization.
Interest income and other expense, net, for the year ended December 31, 2023 increased, compared to the comparable prior year period, primarily due to rising interest rates increasing the interest and dividend income earned on our money market investments and time deposit accounts.
Interest income and other income (expense), net, for the year ended December 31, 2024 increased, compared to the comparable prior year period, primarily due to gains on the repurchase of convertible debt of $61.4 million in the first quarter of 2024.
Interest Income and Other Expense, Net Interest income and other expense, net, consists primarily of interest income earned on our cash, cash equivalents, and short-term investments, 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. 47 Table of Contents Unity Software Inc.
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, cash equivalents, and short-term investments, and foreign currency gains and losses.
General and administrative expense for the year ended December 31, 2023 increased, compared to the comparable prior year period, primarily due to higher personnel-related expenses associated with the ironSource Merger, and to a lesser extent lease related expenses, partially offset by a decrease in professional fees.
General and administrative expense for the year ended December 31, 2024 increased, compared to the comparable prior year period, primarily due to higher personnel-related costs, driven by employee separation costs in the first quarter of 2024. 46 Table of Contents Unity Software Inc.
In the first quarter of 2024, we expect to recognize approximately $195 million in employee separation costs, primarily related to the acceleration and modifications of equity awards. These costs associated with lease terminations and employee separations encompass the substantive cost components of our restructuring efforts.
This resulted in approximately $214 million in employee separation costs, primarily related to the acceleration and modifications of equity awards, and $53 million of non-employee charges associated with these reductions. We are continuing to evaluate our facility needs, and expect more changes in 2025.
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Overview Unity is the world's leading platform for creating and growing interactive, real-time 3D ("RT3D") content and experiences. Our comprehensive set of software, including AI solutions, supports creators through the entire development lifecycle as they build, run, and grow immersive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.
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Recent Developments in Our Business 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, while narrowing our investments in new businesses to those most attractive, mainly Industries beyond gaming.
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Impact of Macroeconomic Trends and Geopolitical Events Recent negative macroeconomic factors, such as inflation, high interest rates, and limited credit availability have and could further cause economic uncertainty and volatility, which could harm our business.
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We also exited businesses where we do not believe that we can provide unique value to customers or generate a sound return to investors.
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Further, increased competition in the advertising market and ongoing restrictions related to the gaming industry in China have impacted our growth rates and may continue to do so. Ongoing geopolitical instability, particularly in Israel, where a significant portion of our Grow Solutions operations is located, may adversely affect our business.
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Specifically, we have limited our Professional Services business to a few selected strategic engagements, we are shifting our multiplayer business to support the demands of live multiplayer games beyond infrastructure, and we have stopped the independent development of professional artistry tools, which we will instead consider integrating into the Unity Editor.
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Recent Developments in Our Business In the third quarter of 2023, we announced changes to our pricing model for our Create Solutions, which will become effective for users of the next major release of the software expected to be available in 2024.
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During the year ended December 31, 2024 we recognized approximately $90 million of revenue associated with these non-strategic portfolios and we expect that these amounts will decline throughout 2025. In the year ended December 31, 2024, we began to substantially reduce our workforce and our office footprint.
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In the fourth quarter of 2023, we underwent a CEO change and began a comprehensive assessment of our product portfolio and our cost structure, to focus on those offerings that are most valuable to our customers, which are the core aspects of our Create and Grow Solutions.
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In the third quarter of 2024, before the pricing changes took effect, we announced the cancellation of those pricing changes, the reversion to a subscription-based model, and price increases, for gaming customers.
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In this effort to reset, we plan to meaningfully decrease our offering of professional services and hardware components that support our hosting services and cease further development of our artistry tools. Together, these offerings contributed approximately $280 million of revenue in 2023, predominately within Create Solutions.
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In light of our portfolio reset, we have revised and restated these metrics to include inputs from our Strategic Portfolio only.
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In addition, in the fourth quarter of 2023 and the first quarter of 2024, we announced reductions to our workforce and our office footprint. In the fourth quarter of 2023 we incurred approximately $16 million of impairment charges on operating leases.
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As of December 31, 2024 2023 2022 Dollar-based net expansion rate 96 % 100 % 111 % Our dollar-based net expansion rate as of December 31, 2024 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.
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Our ability to execute on these plans or execute them in a timely manner is critical to our success, and their timing and full impact on our future results of operations, cash flows, or financial condition are uncertain.
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Our dollar-based net expansion rate as of December 31, 2023, was driven primarily by decreases in Grow Solutions revenue, due to competition in the advertising market, offset by growth in subscriptions revenue, and professional services revenue, within Create Solutions.
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The year over year decrease was largely a result of our de-emphasis on professional services and hosting services, as well as a more competitive environment for our Monetization solutions in 2023.
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Our Grow Solutions revenue did benefit from seasonality in 2024, with the fourth quarter being the strongest quarter for our Grow Solutions primarily as a result of an increase in players during the holidays and device sales during the fourth quarter holiday season. 44 Table of Contents Unity Software Inc.
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Had we excluded Supersonic in the fourth quarter of 2022, the dollar-based net expansion rate would have been 118%. Our dollar-based net expansion rate as of a period end is calculated as current period revenue divided by prior period revenue.
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The decrease in Create Solutions revenue was partially offset by increases in subscription revenue. The decrease in total revenue was further driven by a decrease in Grow Solutions revenue, which was negatively impacted by competition.
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The decrease in dollar-based net expansion rate, compared to the comparable prior year periods, is primarily attributable to Grow Solutions, due to increased competition in the advertising market.
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To be more competitive we are focused on enhancing our machine learning stack and data infrastructure capabilities, which we believe will take some time to manifest in sustainable increased performance.
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Revenue from Create Solutions increased for the year ended December 31, 2023, compared to the comparable prior year periods, primarily due to approximately $99 million of incremental revenue in the fourth quarter of 2023 from Wētā FX Limited, as a result of terminating their subscription rights in exchange for a perpetual license, and growth among existing customers primarily due to our price increases.
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In the near term, we are transitioning to use the new machine learning stack, and we expect that this transition will negatively impact our Grow Solutions revenue, and improve gradually as our model improves and learns over time.
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Although personnel-related costs contributed to the increase in expense period over period primarily due to the increased headcount resulting from the ironSource Merger, we have been evaluating our headcount needs, slowing down our hiring efforts, reducing the number of managerial layers, and focusing on containing the growth rate of other expenses.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our historical consolidated financial statements. 54 Table of Contents Unity Software Inc.
Biggest changeThe effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our historical consolidated financial statements. 52 Table of Contents Unity Software Inc.

Other U 10-K year-over-year comparisons