Unity Software Inc. - Quarter Report: 2025 June (Form 10-Q)

Total current liabilities Convertible notes Long-term deferred revenue Other long-term liabilities Total liabilities Commitments and Contingencies (Note 7)Redeemable noncontrolling interests Stockholders' equity:

Common stock, $ par value:

Authorized shares - and

Issued and outstanding shares - and

Additional paid-in capital Accumulated other comprehensive loss()()Accumulated deficit()()Total Unity Software Inc. stockholders' equity Noncontrolling interest Total stockholders' equity Total liabilities and stockholders' equity$ $

See accompanying Notes to Condensed Consolidated Financial Statements.


Table of Contents						Unity Software Inc.


UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Revenue	$		$		$		$
Cost of revenue
Gross profit
Operating expenses
Research and development
Sales and marketing
General and administrative
Total operating expenses
Loss from operations	()		()		()		()
Interest expense	()		()		()		()
Interest income and other income (expense), net
Loss before income taxes	()		()		()		()
Provision for (benefit from) Income taxes							()
Net loss	()		()		()		()
Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interests			()				()

Net loss attributable to Unity Software Inc.	$	()	$	()	$	()	$	()

Basic and diluted net loss per share attributable to Unity Software Inc.	$	()	$	()	$	()	$	()
Weighted-average shares used in computation of basic and diluted net loss per share

See accompanying Notes to Condensed Consolidated Financial Statements.


Table of Contents						Unity Software Inc.

)))) ))) )) )))) )))


UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2025			2024			2025		2024
Net loss	$	()		$	()		$	()	$	()
Other comprehensive income (loss), net of taxes:
Change in foreign currency translation adjustment				()					()


			$			$


					—





			$			$


		—			—



		—

			$			$


					—




			$			$


		—			—


		—

			$			$

See accompanying Notes to Condensed Consolidated Financial Statements


Table of Contents						Unity Software Inc.


UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended June 30,
	2025		2024
Operating activities
Net loss	$	()	$	()
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Gain on repayment of convertible note	()		()
Impairment of property and equipment
Other	()
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	()
Prepaid expenses and other			()
Other assets			()
Accounts payable	()		()
Accrued expenses and other	()		()
Publisher payables	()
Other long-term liabilities	()		()
Deferred revenue			()
Net cash provided by operating activities
Investing activities
Purchases of non-marketable investments	()
Purchases of intangible assets			()
Purchases of property and equipment	()		()
Net cash used in investing activities	()		()
Financing activities
Proceeds from issuance of convertible notes
Purchase of capped calls	()
Payment of debt issuance costs	()
Repayments of convertible note	()		()
Proceeds from issuance of common stock from employee equity plans
Net cash provided by (used in) financing activities			()
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash			()
Increase (decrease) in cash, cash equivalents, and restricted cash			()
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period	$		$

Supplemental disclosure of cash flow information:
Cash paid for interest	$		$
Cash paid for (refunded from) income taxes, net	$	()	$
Cash paid for operating leases	$		$
Supplemental disclosures of non‑cash investing and financing activities:
Assets acquired under operating lease	$		$

See accompanying Notes to Condensed Consolidated Financial Statements.


Table of Contents						Unity Software Inc.

UNITY SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

, down to one to . These assets are included in “Intangible assets, net” on our consolidated balance sheets, are primarily “developed technology” within intangible assets, and primarily relate to assets arising from our acquisition of Wētā FX Limited in 2023. The shortened useful lives are due to certain assets no longer being actively developed and absence of currently established plans for incorporation into future Unity offerings. The effect of this change in estimate for the year ending December 31, 2025, is anticipated to be an increase in amortization expense and decrease in operating income of approximately $ million.

Employee Separation and Restructuring Costs

In the six months ended June 30, 2025, we incurred incremental employee separation costs of approximately $ million, primarily within sales and marketing and research and development. In the six months ended June 30, 2024, we incurred incremental employee separation costs of approximately $ million, which included $ million of incremental stock-based compensation. Of the incremental employee separation costs we incurred in the six months ended June 30, 2024, $ million are within cost of revenue, $ million are within research and development, $ million are within sales and marketing, and $ million are within general and administrative. Additionally, for the six months ended June 30, 2025 and 2024, we incurred $ million and $ million, respectively, of other restructuring costs, primarily related to office closures.


Table of Contents						Unity Software Inc.

$ $

(1) Due to the highly liquid nature of our investments, amortized cost approximates fair value.

Nonrecurring Fair Value Measurements

We hold equity investments in certain unconsolidated entities without a readily determinable fair value. These strategic investments represent less than a % ownership interest in each of the entities, and we do not have significant influence over or control of the entities. We use the measurement alternative to account for adjustments to these investments for observable transactions for the same or similar investments of the same issuer in any given quarter. If we determine an impairment has occurred, the investment is written down to the estimated fair value. As of June 30, 2025 and December 31, 2024,


Table of Contents						Unity Software Inc.

million and $ million, respectively. No material adjustments to the carrying value of these equity investments were recorded for the three and six months ended June 30, 2025 and 2024.

% ownership interest, are included in our condensed consolidated financial statements. Under certain conditions we may be required to repurchase the third-party interest in Unity China. The redeemable noncontrolling interests in Unity China are recorded as temporary equity on our condensed consolidated balance sheet. $ $ $ Net gain/(loss) attributable to redeemable noncontrolling interests () ()Accretion for redeemable noncontrolling interests Foreign currency translation and foreign exchange adjustments for redeemable noncontrolling interests () ()Balance at end of period$ $ $ $

. $ $ $

As of June 30, 2025, we have entered into a lease that has not yet commenced with future minimum lease payments of $ million which are not yet reflected on our consolidated balance sheet. The operating lease will commence in 2025 with lease terms of approximately .

million principal amount of % Convertible Senior Notes due 2030 (the "2030 Notes"). Proceeds from the issuance of the 2030 Notes were $ million, net of debt issuance costs and the cash was used to purchase capped call transactions, and repurchase convertible notes as discussed below. The debt issuance costs are amortized to interest expense using the straight-line method, which approximates the effective interest method.

As of June 30, 2025, we had $ billion of unsecured convertible notes outstanding including $ million of the 2030 Notes, $ billion issued in November 2022 (the "2027 Notes"), $ million issued in November 2021 (the "2026 Notes", together with the 2027 Notes and 2030 Notes, the "Notes").

2026%$ $

Principal – 2027 Notes

20.4526 $ 2027%

Principal – 2030 Notes

27.6656 $ 2030% Unamortized debt issuance costs, net()()Net carrying amount$ $

1) We entered into capped call transactions in connection with the 2026 and 2030 Notes. The cap price of the capped call transactions relating to the Notes was initially $ and $, respectively, subject to certain adjustments under the terms of the capped call transactions. See below "--Capped Call Transactions."

Interest on the Notes is payable semi-annually in arrears. The combined interest expense on the Notes related to regular interest and the amortization of debt issuance cost was $ million and $ million for the three and six months ended June 30, 2025, respectively, and $ million and $ million for the three and six months ended June 30, 2024, respectively.

As of June 30, 2025, the estimated fair value of the 2030 Notes was approximately $ million. As of June 30, 2025 and December 31, 2024, the estimated fair value of the 2027 Notes was approximately $ billion, and the estimated fair value of the 2026 Notes was approximately $ million and $ billion, respectively. The fair value of the 2027 Notes was based on a combination of a discounted cash flow and Black-Scholes option-pricing model. The fair value of the 2030 Notes and 2026 Notes was based on quoted prices as of that date.

The 2027 Notes may be converted at the election of the holders thereof at any time prior to maturity. The 2026 Notes and 2030 Notes are convertible at the option of the respective holders thereof if


Table of Contents						Unity Software Inc.

% of the principal amount to be repurchased, plus any accrued and unpaid interest to date. The 2026 Notes and 2030 Notes are also redeemable at our option if certain conditions are met, as described in the indentures governing the 2026 Notes and 2030 Notes respectively.

As of June 30, 2025, no holders of the Notes have exercised the conversion rights, and the if-converted value of the Notes did not exceed the principal amount.

Convertible Note Repurchase

During the first quarter of 2025, and the first quarter of 2024, the Company repurchased in privately negotiated transactions and extinguished a portion of the 2026 Notes, with a total principal balance of $ million and $ million, respectively. The aggregate repurchase price for these notes was $ million and $ million, respectively, resulting in pre-tax gains of $ million and $ million, net of the write-off of unamortized issuance costs, respectively. These gains were included in Interest income and other income (expense), net, in the condensed consolidated statement of operations.

Capped Call Transactions

We entered into capped call transactions (the "Capped Call Transactions"), to reduce the potential dilutive effect of the 2026 Notes (the "2026 Capped Call Transactions"), and 2030 Notes (the "2030 Capped Call Transactions"), in connection with their pricing. The 2026 Capped Call Transactions, and the 2030 Capped Call Transactions, had net costs of $ million and $ million, respectively, with call options totaling approximately million and million of our common stock, and with expiration dates ranging from September 18, 2026 to November 12, 2026, and January 15, 2030 to March 13, 2030, respectively. The strike price of the 2026 Capped Call Transactions, and the 2030 Capped Call Transactions are $ and $, respectively, and the cap prices are initially $ and $ per share, respectively, subject to adjustments in certain circumstances. The Capped Call Transactions are freestanding and are considered separately exercisable from the 2026 Notes and 2030 Notes. As of June 30, 2025, the Capped Call Transactions met the conditions for equity classification and were not in the money.


Table of Contents						Unity Software Inc.

$ $ $ $

Purchase commitments (2)

Convertible note principal and interest (3)

Total$ $ $ $ $

(1) Operating leases consist of obligations for real estate, including leases that are not yet commenced.

(2) The substantial majority of our purchase commitments are related to agreements with our data center hosting providers.

(3) Convertible notes due 2026, 2027, and 2030. See Note 6, "Borrowings," above for further discussion.

We expect to meet our remaining commitments.

Legal Matters

In the normal course of business, we are subject to various legal matters. We accrue a liability when management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Legal costs related to such potential losses are expensed as incurred. In addition, recoveries are shown as a reduction in legal costs in the period in which they are realized. With respect to our outstanding matters, based on our current knowledge, we believe that the resolution of such matters will not, either individually or in aggregate, have a material adverse effect on our business or our condensed consolidated financial statements. However, litigation is inherently uncertain, and the outcome of these matters cannot be predicted with certainty. Accordingly, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these matters. From time to time, we may be subject to other legal proceedings and claims arising in the ordinary course of business.

Indemnifications

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees and other parties with respect to certain matters. Indemnification may include losses from our breach of such agreements, services we provide, or third-party intellectual property infringement claims. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments may not be subject to a cap. As of June 30, 2025, there were no known events or circumstances that have resulted in a material indemnification liability to us and we did not incur material costs to defend lawsuits or settle claims related to these indemnifications.

Letters of Credit

We had $ million and $ million of secured letters of credit outstanding as of June 30, 2025 and December 31, 2024, respectively. These primarily relate to our office space leases and are fully collateralized by certificates of deposit which we record in restricted cash as other assets on our condensed consolidated balance sheets.


Table of Contents						Unity Software Inc.

$ $ $ Research and development Sales and marketing General and administrative Total stock-based compensation expense$ $ $ $

Included in the above expenses for the three and six months ended June 30, 2024, is $ million and $ million, respectively, of incremental stock-based compensation expense from modifications, primarily within general and administrative. These amounts predominately relate to the modification of awards held by the founders of ironSource Ltd. that departed in the first quarter of 2024.

Stock Options

$ Granted $ Exercised()$ Forfeited, cancelled, or expired()$ Balance as of June 30, 2025 $ % - %%% - %% - - $% - %% - % - $2024

11.

reportable segment, software solutions. See "Revenue Recognition" in Note 1 of our 2024 Annual Report on Form 10-K, for detailed information regarding our products and services.

Our chief operating decision maker is the chief executive officer, who on a consolidated basis, assess the performance of, drives improvements in, and decides how to allocate resources in the reportable segment, based on multiple measures of performance including consolidated net income,


Table of Contents						Unity Software Inc.


Table of Contents						Unity Software Inc.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Please read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition, or results of operations. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K filed with the SEC on February 21, 2025 and "Part II, Item 1A. Risk Factors" included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments. See the section titled "Note Regarding Forward-Looking Statements and Risk Factor Summary" in this report.

Overview

Unity offers a suite of tools to create, market, and grow games and interactive experiences across all major platforms from mobile, PC, and console, to extended reality (XR).

Our platform consists of two complementary sets of solutions: Create Solutions and Grow Solutions. Starting in the fourth quarter of 2023, we began to reset our product and service offerings to focus on our core businesses, which we refer to as our "Strategic Portfolio": the Unity Engine and related consumption services, and Monetization.

Recent Developments in Our Business

In the six months ended June 30, 2025, we had reductions to our workforce and our office footprint, that resulted in approximately $20 million in employee separation costs, and $11 million of non-employee charges associated with these reductions. We are continuing to evaluate our facility needs and expect more changes in the remainder of 2025.

For additional details, refer to the section titled "Risk Factors."

Key Metrics

As further discussed in Item 2 of Part I, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K, we monitor the following key metrics to help us evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions. We have revised and restated these metrics to include inputs from our Strategic Portfolio only.

Customers Contributing More Than $100,000 of Revenue

We had 1,270 and 1,254 customers contributing more than $100,000 of revenue in the trailing 12 months as of June 30, 2025 and 2024, respectively. The year over year increase was largely a result of our subscriptions growth. While these customers represented the substantial majority of revenue for the six months ended June 30, 2025 and 2024, respectively, no one customer accounted for more than 10% of our revenue for either period.

Dollar-Based Net Expansion Rate

Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with our Create and Grow Solutions customers and to increase their use of our platform. We track our performance by measuring our dollar-based net expansion rate, which compares our Create and Grow Solutions revenue, excluding Strategic Partnerships and Supersonic, from the same set of customers across comparable periods, calculated on a trailing 12-month basis.


Table of Contents						Unity Software Inc.


	As of
	June 30, 2025		June 30, 2024
Dollar-based net expansion rate	100	%	96	%

Our dollar-based net expansion rate as of June 30, 2025 and 2024 was driven primarily by decreases in Grow Solutions revenue, due to competition in the advertising market, offset by growth in subscriptions revenue. The increase in dollar-based net expansion rate, compared to the comparable prior year period, is attributable to reduced declines in Grow Solutions revenue, as noted above.

The chart below illustrates that our dollar-based net expansion rate has been increasing over the last year.


Table of Contents						Unity Software Inc.

Results of Operations

The following table summarizes our consolidated statements of operations data for the periods indicated (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Revenue	$	440,944	$	449,259	$	875,944	$	909,639
Cost of revenue	114,211		108,875		228,168		253,262
Gross profit	326,733		340,384		647,776		656,377
Operating expenses
Research and development	214,807		208,935		435,432		491,663
Sales and marketing	161,513		169,854		323,526		400,479
General and administrative	69,165		91,015		135,505		268,584
Total operating expenses	445,485		469,804		894,463		1,160,726
Loss from operations	(118,752)		(129,420)		(246,687)		(504,349)
Interest expense	(6,030)		(5,829)		(11,921)		(11,864)
Interest income and other income (expense), net	19,837		10,457		77,948		87,100
Loss before income taxes	(104,945)		(124,792)		(180,660)		(429,113)
Provision for (benefit from) Income taxes	2,420		946		4,612		(11,897)
Net loss	$	(107,365)	$	(125,738)	$	(185,272)	$	(417,216)

The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Revenue	100	%	100	%	100	%	100	%
Cost of revenue	26		24		26		28
Gross profit	74		76		74		72
Operating expenses
Research and development	48		47		50		54
Sales and marketing	37		38		37		44
General and administrative	16		20		15		29
Total operating expenses	101		105		102		127
Loss from operations	(27)		(29)		(28)		(55)
Interest expense	(1)		(1)		(1)		(1)
Interest income and other income (expense), net	4		2		8		9
Loss before income taxes	(24)		(28)		(21)		(47)
Provision for (benefit from) Income taxes	—		—		—		(1)
Net loss	(24)	%	(28)	%	(21)	%	(46)	%

Revenue

Create Solutions

We generate Create Solutions revenue primarily through our suite of Create Solutions subscriptions inclusive of enterprise support, professional services, and consumption services. Our subscriptions provide customers access to technologies that allow them to edit, run, and iterate interactive, RT3D and 2D experiences that can be created once and deployed to a variety of platforms. Enhanced support services are provided to our enterprise customers and are generally sold separately from the Create


Table of Contents						Unity Software Inc.

Solutions subscriptions. Professional services are provided to our customers and include consulting, platform integration, training, and custom application and workflow development. Cloud and hosting services are provided to our customers to simplify and enhance the way our users access and harness our solutions.

Grow Solutions

We generate Grow Solutions revenue primarily through our monetization solutions and game publishing services. Our monetization solutions allow publishers, original equipment manufacturers, and mobile carriers to sell available advertising inventory on their mobile applications or hardware devices to advertisers for in-application or on-device placements. Our revenue represents the amount we retain from the transaction we are facilitating through our Unified Auction and mediation platform. Our game publishing services provide game developers with the infrastructure and expertise to launch their mobile games and manage their growth; this is achieved through marketability testing tools, live games management tools and game design support, and optimizing the implementation of the customer's commercial model. Through these publishing services, we generate revenue from in-app advertising in published games and in some cases, in-app purchase revenue.

Our total revenue is summarized as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024


Create Solutions	153,782		150,777		304,160		314,447
Grow Solutions	287,162		298,482		571,784		595,192
Total revenue	$	440,944	$	449,259	$	875,944	$	909,639

Included in revenue in the six months ended June 30, 2025 and 2024, are approximately $20 million and $58 million, respectively, of revenue associated with non-strategic portfolio, primarily in Create Solutions. We expect that these amounts will decline further through the remainder of 2025.

Total revenue decreased in the three and six months ended June 30, 2025, compared to the comparable prior year periods, primarily due to a decrease in Grow Solutions revenue driven by changes in customer demand, competition, and resource allocation decisions. To improve the performance of Grow Solutions, in the first and second quarter of 2025, we migrated one of our ad networks (the "Unity Ad Network") to our new AI Platform, which we call "Unity Vector". These changes contributed to the Unity Ad Network growing 15% from the three months ended March 31, 2025 to the three months ended June 30, 2025, and now represents 49% of total Grow Solutions revenue for the three months ended June 30, 2025.

The decrease in total revenue for the three and six months ended June 30, 2025, was further impacted by changes in Create Solutions revenue, including decreases in professional services revenue, and decreases in consumption services revenue, which were offset by an increase from the sale of a term license for approximately $12 million in the second quarter of 2025, and increases in subscription revenue.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue consists primarily of personnel costs (including salaries, benefits, and stock-based compensation) for employees and subcontractors associated with our product support and professional services organizations, hosting expenses, the amortization of intangible assets, and direct costs associated with our advertising offerings.

Gross profit, or revenue less cost of revenue, has been and will continue to be affected by various factors, including our product mix, the costs associated with third-party hosting services and the extent to which we expand and drive efficiencies in our hosting costs, professional services, and customer support organizations. We expect our gross profit to increase in absolute dollars in the long term but fluctuate in


Table of Contents						Unity Software Inc.

the short term as we stabilize our business following our reset efforts. We expect our gross profit as a percentage of revenue, or gross margin, to fluctuate from period to period.

Cost of revenue for the three months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to an increase in personnel costs, driven by the timing of merit increases in each year, and hosting expenses to operate our advertising networks. Cost of revenue for the six months ended June 30, 2025 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs, driven by our reductions in headcount.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The most significant component of our operating expenses is personnel-related costs, including salaries and wages, sales commissions, bonuses, benefits, stock-based compensation, and payroll taxes.

In January 2024, we committed to a plan to eliminate approximately 25% of our workforce, and we mutually agreed to the departure of the founders of ironSource Ltd. Following these announcements and substantially in the first quarter of 2024, we incurred incremental employee separation costs of approximately $201 million in the six months ended June 30, 2024, largely driven by the acceleration and modification of equity awards, including $15 million within cost of revenue, $44 million within research and development expense, $52 million within sales and marketing expense, and $90 million within general and administrative expense. In addition, we incurred approximately $38 million of non-employee charges associated with this restructuring in 2024, largely within research and development expense.

Further, in the first quarter of 2025 we had additional workforce reductions. In the six months ended June 30, 2025, we incurred incremental employee separation costs related to these actions of approximately $20 million, primarily within research and development, and sales and marketing. In addition, we incurred approximately $11 million of non-employee charges associated with this restructuring in 2025.

Research and Development

Research and development expenses primarily consist of personnel-related costs for the design and development of our platform, hosting expenses, and amortization expenses related to intangible assets. We expect our research and development expenses to increase in absolute dollars in the long term, as we expand our teams to develop new solutions, expand features and functionality with existing solutions, and enter new markets, but fluctuate in the short term as we migrate traffic to Unity Vector. We expect research and development expenses to fluctuate as a percentage of revenue from period to period.

Research and development expense for the three months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to an increase in personnel costs driven by increased costs to attract and retain talent. Research and development expense for the six months ended June 30, 2025 decreased, compared to the comparable prior year period, primarily due to a decrease in personnel costs driven by our reductions in headcount.

Sales and Marketing

Our sales and marketing expenses consist primarily of personnel-related costs, amortization expenses related to intangible assets, and advertising and marketing programs, including user acquisition costs and digital account-based marketing, user events such as developer-centric conferences and our annual Unite user conferences. We expect that our sales and marketing expense will increase in absolute dollars in the long term, as we increase our account-based sales and marketing efforts, direct marketing and community outreach activities, invest in additional tools and technologies, and continue to build brand awareness. We expect sales and marketing expenses to fluctuate as a percentage of revenue from period to period.


Table of Contents						Unity Software Inc.

Sales and marketing expense for the three and six months ended June 30, 2025 decreased, compared to the comparable prior year periods, primarily due to a decrease in personnel costs, driven by our reductions in headcount.

General and Administrative

Our general and administrative expenses primarily consist of personnel-related costs for finance, legal, human resources, IT and administrative employees; allocated overhead, and professional fees for external legal, accounting, and other professional services. We expect that our general and administrative expenses will increase in absolute dollars in the long term, as we scale to support the growth of our business. We expect general and administrative expenses to fluctuate as a percentage of revenue from period to period.

General and administrative expense for the three and six months ended June 30, 2025 decreased, compared to the comparable prior year periods, primarily due to decreases in personnel-related costs and in impairments of operating lease assets, both driven by incremental employee separation costs and non-employee charges from restructuring in 2024.

Interest Expense

Interest expense consists primarily of interest expense associated with our convertible debt and amortization of debt issuance costs.

Interest expense for the three and six months ended June 30, 2025 increased, compared to the comparable prior year periods, due to the amortization of new debt issuance costs, from the issuance of the 2030 notes, partially offset by a reduction in the amortization of debt issuance costs, driven by the repurchase of the 2026 notes.

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net, consists primarily of gains on the repurchase of convertible debt, interest income earned on our cash and cash equivalents, and foreign currency gains and losses. As we have expanded our global operations, our exposure to fluctuations in foreign currencies has increased, and we expect this to continue.

Interest income and other income (expense), net, for the three months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to gains from foreign exchange. Interest income and other income (expense), net, for the six months ended June 30, 2025 decreased, compared to the comparable prior year period, primarily due to changes in the amount of gain recognized from the repurchase of convertible debt. In the first quarter of 2024, we recognized $61.4 million of gain on repurchase of convertible debt, compared to $42.7 million in the first quarter of 2025.

Provision for (benefit from) Income taxes

Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign jurisdictions where we conduct business. We have a valuation allowance against certain of our deferred tax assets, including net operating loss ("NOL") carryforwards and tax credits related primarily to research and development. Our overall effective income tax rate in future periods may be affected by the geographic mix of earnings in the countries in which we operate. Our future effective tax rate may also be affected by changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles in the jurisdictions in which we conduct business. See Note 9, "Income Taxes," of the Notes to Condensed Consolidated Financial Statements.

Provision for income taxes for the three and six months ended June 30, 2025 increased, compared to the comparable prior year period, primarily due to the tax benefit from restructuring efforts undertaken in the first quarter of 2024 that enhanced our ability to offset deferred tax liabilities in the U.S. in future periods, thereby partially reducing the need for a valuation allowance.

On July 4, 2025, the United States enacted new tax reform legislation. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and


Table of Contents						Unity Software Inc.

development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. As a result of the enactment of the legislation, the Company expects a decrease in the tax expense during the third and fourth quarters of 2025. The Company continues to evaluate the impact the new legislation will have on the Consolidated Financial Statements. While this assessment is ongoing, the Company does not expect the new legislation to have a material impact on the Consolidated Financial Statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe the following non-GAAP measures are useful in evaluating our operating performance. We are presenting these non-GAAP financial measures because we believe, when taken collectively, they may be helpful to investors because they provide consistency and comparability with past financial performance.

However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for our consolidated financial statements presented in accordance with GAAP.

Adjusted Gross Profit, Adjusted EBITDA, and Adjusted EPS

We define adjusted gross profit as GAAP gross profit excluding expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, and restructurings and reorganizations. We define adjusted gross margin as adjusted gross profit as a percentage of revenue. We define adjusted EBITDA as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and reorganizations, interest, income tax, and other non-operating activities, which primarily consist of foreign exchange rate gains or losses.

We define adjusted EPS as net income or loss excluding benefits or expenses associated with stock-based compensation, amortization of acquired intangible assets, depreciation, restructurings and reorganizations, and the income tax impact of the preceding adjustments (cumulatively "adjusted net income"), increased by the tax effected impacts from any relevant dilutive securities, divided by the diluted weighted-average outstanding shares. The effective tax rate used in calculating adjusted EPS is estimated for each period, based on the net income or loss adjusted for the items noted above, and may differ from the effective rate used in our financial statements. Shares of common stock that are excluded in our calculation of GAAP diluted net loss per share due to their antidilutive impact on such calculations, are included in the diluted weighted average outstanding shares used in our calculation of adjusted EPS, to the extent they have a dilutive impact on adjusted EPS given the adjusted net income in each period.

We use adjusted gross profit, adjusted EBITDA, and adjusted EPS, in conjunction with traditional GAAP measures to evaluate our financial performance. We believe that adjusted gross profit, adjusted EBITDA, and adjusted EPS provide our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as these metrics exclude expenses that we do not consider to be indicative of our overall operating performance.


Table of Contents						Unity Software Inc.

The following table presents a reconciliation of our adjusted gross profit to our GAAP gross profit, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):


	Three Months Ended
	June 30,
	2025			2024
GAAP gross profit	$	326,733		$	340,384
Add:
Stock-based compensation expense	9,861			7,911
Amortization of intangible assets expense	26,997			26,997
Depreciation expense	1,766			2,232
Restructuring and reorganization costs	275			(253)
Adjusted gross profit	$	365,632		$	377,271
GAAP gross margin	74		%	76		%
Adjusted gross margin	83		%	84		%

The following table presents a reconciliation of our adjusted EBITDA to net loss, the most directly comparable measure as determined in accordance with GAAP, for the periods presented (in thousands):


	Three Months Ended
	June 30,
	2025		2024
GAAP net loss	$	(107,365)	$	(125,738)
Stock-based compensation expense	101,435		113,766
Amortization of intangible assets expense	86,218		88,432
Depreciation expense	10,710		12,977
Restructuring and reorganization costs	10,886		27,714
Interest expense	6,030		5,829
Interest income and other income (expense), net	(19,837)		(10,457)
Provision for Income taxes	2,420		946
Adjusted EBITDA	$	90,497	$	113,469


Table of Contents						Unity Software Inc.

The following table presents a reconciliation of adjusted EPS to diluted net loss per share attributable to Unity Software Inc., the most directly comparable measures as determined in accordance with GAAP, for the periods presented (in thousands):


	Three Months Ended
	June 30,
	2025		2024
GAAP net loss	$	(107,365)	$	(125,738)
Stock-based compensation expense	101,435		113,766
Amortization of intangible assets expense	86,218		88,432
Depreciation expense	10,710		12,977
Restructuring and reorganization costs	10,886		27,714
Income tax impact of adjusting items	(20,527)		(25,803)
Adjusted net income used for calculation of adjusted EPS, before impact of dilutive instruments	$	81,357	$	91,348
Increase from forgone financing costs on dilutive convertible notes, net of tax	789		4,509
Adjusted net income used for calculation of adjusted EPS, including impact of dilutive instruments	$	82,146	$	95,857


Weighted-average common shares used in GAAP diluted net loss per share attributable to Unity Software Inc.	417,566		392,537
Convertible notes	20,896		24,486


Table of Contents						Unity Software Inc.

SIGNATURES

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


	UNITY SOFTWARE INC.

Date: August 6, 2025	By:	/s/ Mark Barrysmith
		Mark Barrysmith
		Chief Accounting Officer
		(Principal Accounting Officer)

Unity Software Inc. - Quarter Report: 2025 June (Form 10-Q)

Similar companies