FALSE2021Q2000181080612/31P1YP1Y00018108062021-01-012021-06-30xbrli:shares00018108062021-08-04iso4217:USD00018108062021-06-3000018108062020-12-31iso4217:USDxbrli:shares00018108062021-04-012021-06-3000018108062020-04-012020-06-3000018108062020-01-012020-06-300001810806us-gaap:PreferredStockMember2021-03-310001810806us-gaap:CommonStockMember2021-03-310001810806us-gaap:AdditionalPaidInCapitalMember2021-03-310001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001810806us-gaap:RetainedEarningsMember2021-03-3100018108062021-03-310001810806us-gaap:CommonStockMember2021-04-012021-06-300001810806us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001810806us-gaap:RetainedEarningsMember2021-04-012021-06-300001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001810806us-gaap:PreferredStockMember2021-06-300001810806us-gaap:CommonStockMember2021-06-300001810806us-gaap:AdditionalPaidInCapitalMember2021-06-300001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001810806us-gaap:RetainedEarningsMember2021-06-300001810806us-gaap:PreferredStockMember2020-03-310001810806us-gaap:CommonStockMember2020-03-310001810806us-gaap:AdditionalPaidInCapitalMember2020-03-310001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001810806us-gaap:RetainedEarningsMember2020-03-3100018108062020-03-310001810806us-gaap:CommonStockMember2020-04-012020-06-300001810806us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001810806srt:ChiefExecutiveOfficerMemberus-gaap:CommonStockMember2020-04-012020-06-300001810806us-gaap:AdditionalPaidInCapitalMembersrt:ChiefExecutiveOfficerMember2020-04-012020-06-300001810806srt:ChiefExecutiveOfficerMember2020-04-012020-06-300001810806us-gaap:RetainedEarningsMember2020-04-012020-06-300001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001810806us-gaap:PreferredStockMember2020-06-300001810806us-gaap:CommonStockMember2020-06-300001810806us-gaap:AdditionalPaidInCapitalMember2020-06-300001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001810806us-gaap:RetainedEarningsMember2020-06-3000018108062020-06-300001810806us-gaap:PreferredStockMember2020-12-310001810806us-gaap:CommonStockMember2020-12-310001810806us-gaap:AdditionalPaidInCapitalMember2020-12-310001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001810806us-gaap:RetainedEarningsMember2020-12-310001810806us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001810806srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001810806us-gaap:CommonStockMember2021-01-012021-06-300001810806us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-300001810806us-gaap:RetainedEarningsMember2021-01-012021-06-300001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001810806us-gaap:PreferredStockMember2019-12-310001810806us-gaap:CommonStockMember2019-12-310001810806us-gaap:AdditionalPaidInCapitalMember2019-12-310001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001810806us-gaap:RetainedEarningsMember2019-12-3100018108062019-12-310001810806unity:NonIPOMemberus-gaap:CommonStockMember2020-01-012020-06-300001810806us-gaap:AdditionalPaidInCapitalMemberunity:NonIPOMember2020-01-012020-06-300001810806unity:NonIPOMember2020-01-012020-06-300001810806unity:NonChiefExecutiveOfficerRelatedMemberus-gaap:CommonStockMember2020-01-012020-06-300001810806unity:NonChiefExecutiveOfficerRelatedMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-300001810806unity:NonChiefExecutiveOfficerRelatedMember2020-01-012020-06-300001810806srt:ChiefExecutiveOfficerMemberus-gaap:CommonStockMember2020-01-012020-06-300001810806us-gaap:AdditionalPaidInCapitalMembersrt:ChiefExecutiveOfficerMember2020-01-012020-06-300001810806srt:ChiefExecutiveOfficerMember2020-01-012020-06-300001810806us-gaap:CommonStockMember2020-01-012020-06-300001810806us-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-300001810806unity:ConvertibleSeriesEPreferredStockMemberus-gaap:PreferredStockMember2020-01-012020-06-300001810806unity:ConvertibleSeriesEPreferredStockMember2020-01-012020-06-300001810806us-gaap:RetainedEarningsMember2020-01-012020-06-300001810806us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-06-300001810806srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-01-010001810806unity:CreateSolutionsMember2021-04-012021-06-300001810806unity:CreateSolutionsMember2020-04-012020-06-300001810806unity:CreateSolutionsMember2021-01-012021-06-300001810806unity:CreateSolutionsMember2020-01-012020-06-300001810806unity:OperateSolutionsMember2021-04-012021-06-300001810806unity:OperateSolutionsMember2020-04-012020-06-300001810806unity:OperateSolutionsMember2021-01-012021-06-300001810806unity:OperateSolutionsMember2020-01-012020-06-300001810806unity:StrategicPartnershipsAndOtherMember2021-04-012021-06-300001810806unity:StrategicPartnershipsAndOtherMember2020-04-012020-06-300001810806unity:StrategicPartnershipsAndOtherMember2021-01-012021-06-300001810806unity:StrategicPartnershipsAndOtherMember2020-01-012020-06-300001810806country:US2021-04-012021-06-300001810806country:US2020-04-012020-06-300001810806country:US2021-01-012021-06-300001810806country:US2020-01-012020-06-300001810806unity:GreaterChinaMember2021-04-012021-06-300001810806unity:GreaterChinaMember2020-04-012020-06-300001810806unity:GreaterChinaMember2021-01-012021-06-300001810806unity:GreaterChinaMember2020-01-012020-06-300001810806us-gaap:EMEAMember2021-04-012021-06-300001810806us-gaap:EMEAMember2020-04-012020-06-300001810806us-gaap:EMEAMember2021-01-012021-06-300001810806us-gaap:EMEAMember2020-01-012020-06-300001810806unity:AsiaPacificExcludingGreaterChinaMember2021-04-012021-06-300001810806unity:AsiaPacificExcludingGreaterChinaMember2020-04-012020-06-300001810806unity:AsiaPacificExcludingGreaterChinaMember2021-01-012021-06-300001810806unity:AsiaPacificExcludingGreaterChinaMember2020-01-012020-06-300001810806unity:OtherAmericasMember2021-04-012021-06-300001810806unity:OtherAmericasMember2020-04-012020-06-300001810806unity:OtherAmericasMember2021-01-012021-06-300001810806unity:OtherAmericasMember2020-01-012020-06-3000018108062021-01-012021-03-3100018108062020-01-012020-12-3100018108062021-07-012021-06-30xbrli:pure00018108062022-07-012021-06-300001810806us-gaap:MoneyMarketFundsMember2021-06-300001810806us-gaap:CommercialPaperMember2021-06-300001810806us-gaap:CashEquivalentsMember2021-06-300001810806us-gaap:AssetBackedSecuritiesMember2021-06-300001810806us-gaap:CorporateDebtSecuritiesMember2021-06-300001810806us-gaap:USGovernmentDebtSecuritiesMember2021-06-300001810806us-gaap:SovereignDebtSecuritiesMember2021-06-300001810806us-gaap:MoneyMarketFundsMember2020-12-310001810806us-gaap:CommercialPaperMember2020-12-310001810806us-gaap:CashEquivalentsMember2020-12-310001810806us-gaap:AssetBackedSecuritiesMember2020-12-310001810806us-gaap:CorporateDebtSecuritiesMember2020-12-310001810806us-gaap:USGovernmentDebtSecuritiesMember2020-12-310001810806us-gaap:SovereignDebtSecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-06-300001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-06-300001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-06-300001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-06-300001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-06-300001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-06-300001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-06-300001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2021-06-300001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2021-06-300001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-06-300001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2021-06-300001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2021-06-300001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-12-310001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-12-310001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-12-310001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-12-310001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2020-12-310001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2020-12-310001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2020-12-310001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2020-12-310001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-12-310001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-12-310001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2020-12-310001810806us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2020-12-310001810806us-gaap:FairValueMeasurementsRecurringMemberus-gaap:SovereignDebtSecuritiesMember2020-12-310001810806unity:MetaverseTechnologiesLimitedMember2021-06-300001810806unity:MetaverseTechnologiesLimitedMember2021-06-012021-06-300001810806unity:MetaverseTechnologiesLimitedMember2021-04-012021-06-300001810806unity:MetaverseTechnologiesLimitedMember2021-01-012021-06-300001810806unity:VisualLive3DLLCMember2021-01-012021-06-300001810806unity:VisualLive3DLLCMember2021-06-300001810806us-gaap:DevelopedTechnologyRightsMember2021-01-012021-06-300001810806us-gaap:DevelopedTechnologyRightsMember2021-06-300001810806us-gaap:CustomerRelationshipsMember2021-01-012021-06-300001810806us-gaap:CustomerRelationshipsMember2021-06-300001810806us-gaap:TrademarksMember2021-01-012021-06-300001810806us-gaap:TrademarksMember2021-06-300001810806us-gaap:DevelopedTechnologyRightsMember2020-01-012020-12-310001810806us-gaap:DevelopedTechnologyRightsMember2020-12-310001810806us-gaap:TrademarksMember2020-01-012020-12-310001810806us-gaap:TrademarksMember2020-12-310001810806us-gaap:CustomerRelationshipsMember2020-01-012020-12-310001810806us-gaap:CustomerRelationshipsMember2020-12-310001810806us-gaap:LeaseholdImprovementsMember2021-06-300001810806us-gaap:LeaseholdImprovementsMember2020-12-310001810806us-gaap:ComputerEquipmentMember2021-06-300001810806us-gaap:ComputerEquipmentMember2020-12-310001810806us-gaap:FurnitureAndFixturesMember2021-06-300001810806us-gaap:FurnitureAndFixturesMember2020-12-310001810806us-gaap:SoftwareDevelopmentMember2021-06-300001810806us-gaap:SoftwareDevelopmentMember2020-12-310001810806us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-06-300001810806us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2020-12-310001810806us-gaap:ConstructionInProgressMember2021-06-300001810806us-gaap:ConstructionInProgressMember2020-12-310001810806country:US2021-06-300001810806country:US2020-12-310001810806country:CA2021-06-300001810806country:CA2020-12-310001810806country:GB2021-06-300001810806country:GB2020-12-310001810806unity:GreaterChinaMember2021-06-300001810806unity:GreaterChinaMember2020-12-310001810806unity:EMEAExcludingUnitedKingdomMember2021-06-300001810806unity:EMEAExcludingUnitedKingdomMember2020-12-310001810806unity:AsiaPacificExcludingGreaterChinaMember2021-06-300001810806unity:AsiaPacificExcludingGreaterChinaMember2020-12-310001810806unity:OtherAmericasExcludingCanadaMember2021-06-300001810806unity:OtherAmericasExcludingCanadaMember2020-12-310001810806us-gaap:OtherCurrentAssetsMember2021-06-300001810806us-gaap:OtherAssetsMember2021-06-300001810806us-gaap:OtherCurrentAssetsMember2020-12-310001810806us-gaap:OtherAssetsMember2020-12-310001810806srt:MinimumMember2021-06-300001810806srt:MaximumMember2021-06-300001810806srt:MinimumMember2021-01-012021-06-300001810806srt:MaximumMember2021-01-012021-06-30utr:sqft0001810806unity:SanFranciscoCaliforniaMember2018-08-310001810806unity:SanFranciscoCaliforniaMember2021-06-012021-06-300001810806us-gaap:RevolvingCreditFacilityMemberunity:CreditAgreementMember2019-12-200001810806us-gaap:StandbyLettersOfCreditMemberunity:CreditAgreementMember2019-12-200001810806us-gaap:RevolvingCreditFacilityMemberunity:CreditAgreementMemberus-gaap:BaseRateMember2021-01-012021-06-300001810806us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMemberunity:CreditAgreementMember2021-01-012021-06-300001810806us-gaap:RevolvingCreditFacilityMemberus-gaap:FederalFundsEffectiveSwapRateMemberunity:CreditAgreementMember2021-01-012021-06-300001810806us-gaap:RevolvingCreditFacilityMemberus-gaap:EurodollarMemberunity:CreditAgreementMember2021-01-012021-06-300001810806us-gaap:RevolvingCreditFacilityMemberunity:CreditAgreementMember2021-01-012021-06-300001810806us-gaap:StandbyLettersOfCreditMemberunity:CreditAgreementMember2021-01-012021-06-300001810806us-gaap:RevolvingCreditFacilityMemberunity:CreditAgreementMember2020-03-012020-03-310001810806us-gaap:RevolvingCreditFacilityMemberunity:CreditAgreementMember2020-09-012020-09-300001810806unity:CreditAgreementMember2020-01-012020-06-300001810806unity:CreditAgreementMember2021-01-012021-06-300001810806unity:CloudServiceMember2018-03-012018-03-310001810806unity:CloudServiceMember2021-01-012021-06-300001810806unity:CloudServiceMember2021-04-012021-06-300001810806unity:CloudServiceMember2020-04-012020-06-300001810806unity:CloudServiceMember2020-01-012020-06-300001810806us-gaap:LetterOfCreditMember2021-06-300001810806us-gaap:LetterOfCreditMember2020-12-3100018108062020-01-012020-01-310001810806unity:A2020EquityIncentivePlanMember2021-01-012021-06-300001810806us-gaap:StockAppreciationRightsSARSMemberunity:A2020EquityIncentivePlanMember2021-01-012021-06-300001810806us-gaap:EmployeeStockOptionMemberunity:A2020EquityIncentivePlanMember2021-01-012021-06-300001810806unity:A2020EquityIncentivePlanMemberunity:IncentiveStockOptionMember2021-01-012021-06-300001810806unity:A2020EquityIncentivePlanMember2021-06-300001810806us-gaap:EmployeeStockMember2021-06-300001810806us-gaap:EmployeeStockMember2021-01-012021-06-300001810806us-gaap:CostOfSalesMember2021-04-012021-06-300001810806us-gaap:CostOfSalesMember2020-04-012020-06-300001810806us-gaap:CostOfSalesMember2021-01-012021-06-300001810806us-gaap:CostOfSalesMember2020-01-012020-06-300001810806us-gaap:ResearchAndDevelopmentExpenseMember2021-04-012021-06-300001810806us-gaap:ResearchAndDevelopmentExpenseMember2020-04-012020-06-300001810806us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-06-300001810806us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-06-300001810806us-gaap:SellingAndMarketingExpenseMember2021-04-012021-06-300001810806us-gaap:SellingAndMarketingExpenseMember2020-04-012020-06-300001810806us-gaap:SellingAndMarketingExpenseMember2021-01-012021-06-300001810806us-gaap:SellingAndMarketingExpenseMember2020-01-012020-06-300001810806us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300001810806us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-06-300001810806us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-06-300001810806us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-06-300001810806us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001810806us-gaap:RestrictedStockUnitsRSUMember2021-06-300001810806us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001810806srt:ChiefFinancialOfficerMember2021-03-012021-03-310001810806srt:ChiefFinancialOfficerMember2021-01-012021-06-300001810806srt:ChiefFinancialOfficerMemberus-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-03-310001810806srt:ChiefFinancialOfficerMember2021-04-012021-06-300001810806us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001810806us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001810806us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001810806srt:MinimumMemberus-gaap:EmployeeStockOptionMember2021-04-012021-06-300001810806us-gaap:EmployeeStockOptionMembersrt:MaximumMember2021-04-012021-06-300001810806srt:MinimumMemberus-gaap:EmployeeStockOptionMember2020-04-012020-06-300001810806us-gaap:EmployeeStockOptionMembersrt:MaximumMember2020-04-012020-06-300001810806us-gaap:EmployeeStockOptionMembersrt:MaximumMember2021-01-012021-06-300001810806srt:MinimumMemberus-gaap:EmployeeStockOptionMember2020-01-012020-06-300001810806us-gaap:EmployeeStockOptionMembersrt:MaximumMember2020-01-012020-06-300001810806srt:MinimumMemberus-gaap:EmployeeStockOptionMember2021-01-012021-06-300001810806us-gaap:RestrictedStockUnitsRSUMember2020-12-310001810806unity:PreIPOMembersrt:MinimumMemberus-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001810806unity:PreIPOMemberus-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMember2021-01-012021-06-300001810806srt:MinimumMemberus-gaap:RestrictedStockUnitsRSUMemberunity:PostIPOMember2021-01-012021-06-300001810806us-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMemberunity:PostIPOMember2021-01-012021-06-300001810806us-gaap:ConvertiblePreferredStockMember2021-04-012021-06-300001810806us-gaap:ConvertiblePreferredStockMember2020-04-012020-06-300001810806us-gaap:ConvertiblePreferredStockMember2021-01-012021-06-300001810806us-gaap:ConvertiblePreferredStockMember2020-01-012020-06-300001810806us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001810806us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001810806us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001810806us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001810806us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300001810806us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300001810806us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001810806us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300001810806us-gaap:SubsequentEventMemberunity:July2021BusinessAcquisitionOneMember2021-07-012021-07-310001810806unity:July2021BusinessAcquisitionTwoMemberus-gaap:SubsequentEventMember2021-07-012021-07-310001810806unity:August2021BusinessAcquisitionMemberus-gaap:SubsequentEventMember2021-08-012021-08-11

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 001-39497
UNITY SOFTWARE INC.
(Exact name of registrant as specified in its charter)
Delaware 27-0334803
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
30 3rd Street
San Francisco, California 94103‑3104
(Address, including zip code, of principal executive offices)
(415) 539‑3162
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $0.000005 par value U The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer Accelerated filer
Nonaccelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes No x
As of August 4, 2021, there were 282,518,597 shares of the registrant’s common stock outstanding.



UNITY SOFTWARE INC.
FORM 10‑Q
For the Quarter Ended June 30, 2021
TABLE OF CONTENTS
Page
Item 1.
1
1
2
3
4
6
8
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.




NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10‑Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “toward,” “will,” “would,” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
our expectations regarding our financial performance, including revenue, cost of revenue, gross profit or gross margin, operating expenses, key metrics, and our ability to achieve or maintain future profitability;
our ability to effectively manage our growth;
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
our expectations regarding the demand for real-time 3D content in gaming and other industries and our ability to increase revenue from these industries;
economic and industry trends;
our ability to increase sales of our solutions;
our ability to attract and retain customers;
our ability to expand our offerings and cross-sell to our existing customers;
our expectations regarding the plans implemented or announced by Apple with respect to access of advertising identifiers and related matters, and the potential impact on our financial performance;
our ability to maintain and expand our relationships with strategic partners;
our ability to continue to grow across all major global markets;
the effects of increased competition in our markets and our ability to successfully compete with companies that are currently in, or may in the future enter, the markets in which we operate;
our estimated market opportunity;
our ability to timely and effectively scale and adapt our solutions;
our ability to continue to innovate and enhance our solutions;
our ability to develop new products, features and use cases and bring them to market in a timely manner, and whether our customers and prospective customers will adopt these new products, features and use cases;
our ability to maintain, protect, and enhance our brand and intellectual property;
our ability to identify and complete acquisitions that complement and expand the functionality of our platform;
our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the United States and globally;
our reliance on key personnel and our ability to attract, maintain, and retain management and skilled personnel;



the effects of the COVID-19 pandemic or other public health crises; and
the future trading prices of our common stock.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10‑Q.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10‑Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. Readers are cautioned that these forward‑looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under “Part II—Other Information, Item 1A. Risk Factors” and elsewhere herein. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10‑Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10‑Q. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10‑Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10‑Q to reflect events or circumstances after the date of this Quarterly Report on Form 10‑Q or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
Additional Information
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “our company,” and “Unity” refer to Unity Software Inc. and its consolidated subsidiaries. The Unity design logos, “Unity” and our other registered or common law trademarks, service marks, or trade names appearing in this Quarterly Report on Form 10-Q are the property of Unity Software Inc. or its affiliates. Other trade names, trademarks, and service marks used in this Quarterly Report are the property of their respective owners.
Investors and others should note that we may announce material business and financial information using our investor relations website (www.investors.unity.com), our filings with the Securities and Exchange Commission, press releases, public conference calls, and public webcasts as means of complying with our disclosure obligations under Regulation FD. We encourage investors and others interested in our company to review the information that we make available.



RISK FACTORS SUMMARY
Investing in our common stock involves numerous risks, including the risks described in “Part II—Other Information, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.
We have a history of losses and may not achieve or sustain profitability in the future.
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.
Our core value of putting our users first may cause us to forgo short-term gains and may not lead to the long-term benefits we expect.
Our business and operations have experienced recent rapid growth, which may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects.
Our business depends on our ability to retain our existing customers and expand their use of our platform.
If we are unable to attract new customers, our business, financial condition and results of operations will be adversely affected.
We derive a significant portion of our revenue from our Operate Solutions. If we fail to attract and retain Operate Solutions customers, our business and results of operations would be adversely affected.
Operating system platform providers or application stores may change terms of service, policies or technical requirements to require us or our customers to change data collection and privacy practices, business models, operations, practices, advertising activities or application content, which could adversely impact our business.
If we are unable to further expand into new industries, or if our solutions for any new industry fail to achieve market acceptance, our growth and operating results could be adversely affected, and we may be required to reconsider our growth strategy.
Our business relies on strategic relationships with hardware, operating system, device, game console and other technology providers. If we are unable to maintain favorable terms and conditions and business relations with respect to our strategic relationships, our business could be harmed.
If we do not make our platform, including new versions or technology advancements, easier to use or properly train customers on how to use our platform, our ability to broaden the appeal of our platform and solutions and to increase our revenue could suffer.
Interruptions, performance problems, or defects associated with our platform may adversely affect our business, financial condition, and results of operations.
The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed.
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 products may be reduced, and we may incur significant liabilities.
If we fail to timely release updates and new features to our platform and adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or changing customer needs, requirements, or preferences, our platform may become less competitive.



We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition, and results of operations could be harmed.
We rely on the performance of highly skilled personnel, including our management and other key employees, and the loss of one or more of such personnel, or of a significant number of our team members, or the inability to attract and retain executives and employees we need to support our operations and growth, could harm our business.
Our business depends on the interoperability of our solutions across third-party platforms, operating systems, and applications, and on our ability to ensure our platform and solutions operate effectively on those platforms. If we are not able to integrate our solutions with third party platforms in a timely manner, our business may be harmed.
We are dependent on the success of our customers in the gaming market. Adverse events relating to our customers or their games could have a negative impact on our business.
We rely upon third-party data centers and providers of cloud-based infrastructure to host our platform. Any disruption in the operations of these third-party providers, limitations on capacity or interference with our use could adversely affect our business, financial condition, and results of operations.
We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price, and the value of your investment could decline.
Seasonality may cause fluctuations in our sales and results of operations.
Downturns or upturns in our sales may not be immediately reflected in our financial position and results of operations.
Third parties with whom we do business may be unable to honor their obligations to us or their actions may put us at risk.
We use resellers and other third parties to sell, market, and deploy our solutions to a variety of customers, and our failure to effectively develop, manage, and maintain our indirect sales channels would harm our business.
Our direct sales force targets larger customers, and sales to these customers involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller customers.
If we fail to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, financial condition, and results of operations may suffer.
Our culture emphasizes innovation, and if we cannot maintain this culture as we grow, our business could be harmed.
We are subject to rapidly changing and increasingly stringent laws, contractual obligations, and industry standards relating to privacy, data security, and the protection of children. The restrictions and costs imposed by these requirements, or our actual or perceived failure to comply with them, could harm our business.
Adverse changes in the geopolitical relationship between the United States and China or changes in China's economic and regulatory landscape could have an adverse effect on business conditions.
Concentration of ownership of our common stock among our existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions.
If we are unable to adequately address these and other risks we face, our business may be harmed.


Unity Software Inc.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
As of
June 30, 2021 December 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 1,001,944  $ 1,272,578 
Marketable securities 587,080  479,406 
Accounts receivable, net of allowances of $5,778 and $2,714 as of June 30, 2021 and December 31, 2020, respectively
340,716  274,255 
Prepaid expenses 34,877  32,025 
Other current assets 30,552  22,396 
Total current assets 1,995,169  2,080,660 
Property and equipment, net 95,948  95,544 
Operating lease right‑of‑use assets 110,656  103,609 
Goodwill 342,134  286,251 
Intangible assets, net 65,701  57,459 
Restricted cash 10,823  21,369 
Other assets 41,301  26,333 
Total assets $ 2,661,732  $ 2,671,225 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 8,306  $ 11,303 
Accrued expenses and other current liabilities 128,142  106,306 
Publisher payables 221,368  182,269 
Income and other taxes payable 49,336  64,116 
Deferred revenue 123,461  113,853 
Operating lease liabilities 25,783  25,375 
Total current liabilities 556,396  503,222 
Long-term deferred revenue 19,570  20,523 
Long-term operating lease liabilities 104,574  98,532 
Other long-term liabilities 11,409  11,805 
Total liabilities 691,949  634,082 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.000005 par value; 100,000 shares authorized, and no shares issued and outstanding as of June 30, 2021; 100,000 shares authorized, no shares issued and outstanding as of December 31, 2020
—  — 
Common stock, $0.000005 par value; 1,000,000 and 1,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 282,177 and 273,537 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
Additional paid-in capital 3,028,077  2,838,057 
Accumulated other comprehensive loss (3,474) (3,418)
Accumulated deficit (1,054,822) (797,498)
Total stockholders’ equity 1,969,783  2,037,143 
Total liabilities and stockholders’ equity $ 2,661,732  $ 2,671,225 
See accompanying Notes to Condensed Consolidated Financial Statements.


Unity Software Inc.
UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Revenue $ 273,562  $ 184,331  $ 508,334  $ 351,325 
Cost of revenue 57,725  40,432  116,459  72,300 
Gross profit 215,837  143,899  391,875  279,025 
Operating expenses
Research and development 154,216  85,108  308,231  166,859 
Sales and marketing 74,888  43,716  144,681  86,975 
General and administrative 135,917  39,920  199,049  77,473 
Total operating expenses 365,021  168,744  651,961  331,307 
Loss from operations (149,184) (24,845) (260,086) (52,282)
Interest expense (485) (656) (600) (788)
Interest income and other expense, net 70  (662) 1,635  1,194 
Loss before provision for income taxes (149,599) (26,163) (259,051) (51,876)
Provision for (benefit from) income taxes (1,257) 1,188  (3,249) 2,211 
Net loss (148,342) (27,351) (255,802) (54,087)
Basic and diluted net loss per share:
Net loss per share attributable to our common stockholders, basic and diluted $ (0.53) $ (0.21) $ (0.92) $ (0.42)
Weighted-average shares used in per share calculation attributable to our common stockholders, basic and diluted 280,374  129,826  278,233  128,804 
See accompanying Notes to Condensed Consolidated Financial Statements.
2


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,
2021 2020 2021 2020
Net loss $ (148,342) $ (27,351) $ (255,802) $ (54,087)
Other comprehensive loss, net of taxes:
Change in foreign currency translation adjustment 81  18  50  (77)
Change in unrealized losses on marketable securities (3) —  (106) — 
Other comprehensive loss 78  18  (56) (77)
Comprehensive loss $ (148,264) $ (27,333) $ (255,858) $ (54,164)
See accompanying Notes to Condensed Consolidated Financial Statements.
3


Unity Software Inc.
UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Three Months Ended June 30, 2021
Accumulated
Additional Other Total
Convertible Preferred Stock Common Stock Paid-In Comprehensive Accumulated Stockholders’
Shares Amount Shares Amount Capital Loss Deficit Equity
Balance at March 31, 2021 —  $ —  279,170,161  $ $ 2,927,242  $ (3,552) $ (906,480) $ 2,017,212 
Issuance of common stock from exercise of stock options —  —  2,287,484  —  15,435  —  —  15,435 
Issuance of common stock for settlement of RSUs —  —  719,399  —  —  —  —  — 
Stock‑based compensation expense —  —  —  —  74,913  —  —  74,913 
Stock-based compensation expense in connection with modified awards for certain employees —  —  —  —  10,487  —  —  10,487 
Net loss —  —  —  —  —  —  (148,342) (148,342)
Foreign currency translation adjustment —  —  —  —  —  81  —  81 
Unrealized loss on investments —  —  —  —  —  (3) —  (3)
Balance at June 30, 2021 —  $ —  282,177,044  $ $ 3,028,077  $ (3,474) $ (1,054,822) $ 1,969,783 
Three Months Ended June 30, 2020
Accumulated
Additional Other Total
Convertible Preferred Stock Common Stock Paid-In Comprehensive Accumulated Stockholders’
Shares Amount Shares Amount Capital Loss Deficit Equity
Balance at March 31, 2020 102,717,396  $ 836,529  128,569,006  $ $ 338,183  $ (3,727) $ (541,926) $ 629,060 
Issuance of common stock from exercise of stock options —  —  392,693  —  1,507  —  —  1,507 
Issuance of common stock from exercise of stock options in connection with nonrecourse promissory note —  —  5,656,927  —  8,856  —  —  8,856 
Common stock issued in connection with acquisitions —  —  1,030,711  —  23,362  —  —  23,362 
Stock‑based compensation expense —  —  —  —  11,963  —  —  11,963 
Net loss —  —  —  —  —  —  (27,351) (27,351)
Foreign currency translation adjustment —  —  —  —  —  18  —  18 
Balance at June 30, 2020 102,717,396  $ 836,529  135,649,337  $ $ 383,871  $ (3,709) $ (569,277) $ 647,415 
See accompanying Notes to Condensed Consolidated Financial Statements.



4


Unity Software Inc.
UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED
(In thousands, except share data)
(Unaudited)
Six Months Ended June 30, 2021
Accumulated
Additional Other Total
Convertible Preferred Stock Common Stock Paid‑In Comprehensive Accumulated Stockholders’
Shares Amount Shares Amount Capital Loss Deficit Equity
Balance at December 31, 2020 —  $ —  273,537,218  $ $ 2,838,057  $ (3,418) $ (797,498) $ 2,037,143 
Cumulative effect of accounting change —  —  —  —  —  —  (1,522) (1,522)
Issuance of common stock from exercise of stock options —  —  6,831,982  —  38,059  —  —  38,059 
Issuance of common stock for settlement of RSUs —  —  1,807,844  —  —  —  —  — 
Stock‑based compensation expense —  —  —  —  139,337  —  —  139,337 
Stock-based compensation expense in connection with modified awards for certain employees —  —  —  —  12,624  —  —  12,624 
Net loss —  —  —  —  —  —  (255,802) (255,802)
Foreign currency translation adjustment —  —  —  —  —  50  —  50 
Unrealized loss on investments —  —  —  —  —  (106) —  (106)
Balance at June 30, 2021 —  $ —  282,177,044  $ $ 3,028,077  $ (3,474) $ (1,054,822) $ 1,969,783 
Six Months Ended June 30, 2020
Accumulated
Additional Other Total
Convertible Preferred Stock Common Stock Paid-In Comprehensive Accumulated Stockholders’
Shares Amount Shares Amount Capital Loss Deficit Equity
Balance at December 31, 2019 95,899,214  $ 686,559  123,261,024  $ $ 226,173  $ (3,632) $ (515,190) $ 393,911 
Issuance of common stock —  —  4,545,455  —  100,000  —  —  100,000 
Issuance of common stock from exercise of stock options —  —  1,160,220  —  3,936  —  —  3,936 
Issuance of common stock from exercise of stock options in connection with nonrecourse promissory note —  —  5,656,927  —  8,856  —  —  8,856 
Common stock issued in connection with acquisitions —  —  1,030,711  —  23,362  —  —  23,362 
Purchase and retirement of treasury stock —  —  (5,000) —  (110) —  —  (110)
Issuance of convertible Series E preferred stock, net of issuance costs 6,818,182  149,970  —  —  —  —  —  149,970 
Stock‑based compensation expense —  —  —  —  21,654  —  —  21,654 
Net loss —  —  —  —  —  —  (54,087) (54,087)
Foreign currency translation adjustment —  —  —  —  —  (77) —  (77)
Balance at June 30, 2020 102,717,396  $ 836,529  135,649,337  $ $ 383,871  $ (3,709) $ (569,277) $ 647,415 
See accompanying Notes to Condensed Consolidated Financial Statements.
5


Unity Software Inc.
UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
2021 2020
Operating activities
Net loss $ (255,802) $ (54,087)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 24,102  20,010 
Stock-based compensation expense 139,337  21,654 
Stock-based compensation expense in connection with modified awards for certain employees 12,624  — 
Other 7,680  1,393 
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net (67,549) (8,828)
Prepaid expenses (2,806) (4,870)
Other current assets (9,959) (11,837)
Operating lease right-of-use ("ROU") assets 11,895  12,008 
Deferred tax, net (3,139) 114 
Other assets (8,819) (309)
Accounts payable (1,274) 1,205 
Accrued expenses and other current liabilities 19,944  5,819 
Publisher payables 39,099  1,671 
Income and other taxes payable (16,477) (3,400)
Operating lease liabilities (12,804) (12,065)
Other long-term liabilities 149  5,173 
Deferred revenue 8,236  10,930 
Net cash used in operating activities (115,563) (15,419)
Investing activities
Purchase of marketable securities (290,808) — 
Proceeds from principal repayments on marketable securities 11,624  — 
Maturities of marketable securities 168,000  — 
Purchase of non-marketable investments (4,600) — 
Purchase of property and equipment (18,551) (19,275)
Acquisition of intangible assets —  (750)
Business acquisitions, net of cash acquired (69,430) (23,338)
Net cash used in investing activities (203,765) (43,363)
6


Unity Software Inc.
UNITY SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
2021 2020
Financing activities
Proceeds from revolving loan facility —  125,000 
Payment of debt issuance costs —  (247)
Proceeds from issuance of convertible preferred stock, net of issuance costs —  149,970 
Proceeds from issuance of common stock —  100,000 
Purchase and retirement of treasury stock —  (110)
Proceeds from exercise of stock options 38,059  3,936 
Proceeds from exercise of stock options in connection with nonrecourse promissory note —  8,856 
Net cash provided by financing activities 38,059  387,405 
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 89  (52)
Increase (decrease) in cash, cash equivalents, and restricted cash (281,180) 328,571 
Cash and restricted cash, beginning of period 1,293,947  147,096 
Cash, cash equivalents, and restricted cash, end of period $ 1,012,767  $ 475,667 
Supplemental disclosure of cash flow information:
Cash paid for interest $ 110  $ 723 
Cash paid for income taxes, net of refunds $ 5,839  $ 9,453 
Supplemental disclosures of non‑cash investing and financing activities:
Fair value of common stock issued as consideration for business acquisitions $ —  $ 23,126 
Fair value of common stock issued as consideration for acquisition of intangible assets $ —  $ 236 
Accrued property and equipment $ 4,743  $ 3,180 
The below table provides a reconciliation of cash and restricted cash reported within the condensed consolidated balance sheets to the total of the same amounts shown on the condensed consolidated statements of cash flows (in thousands):
As of June 30,
2021 2020
Cash and cash equivalents $ 1,001,944  $ 453,258 
Restricted cash 10,823  22,409 
Total cash, cash equivalents, and restricted cash $ 1,012,767  $ 475,667 
See accompanying Notes to Condensed Consolidated Financial Statements.

7


Unity Software Inc.
UNITY SOFTWARE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
We were founded as Over the Edge Entertainment in Denmark in 2004. We reorganized as a Delaware corporation on May 28, 2009 as Unity Software Inc. (collectively referred to with its wholly owned subsidiaries as “we,” “our” or “us”). We provide a comprehensive set of software solutions to create, run and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices, among others.
We are headquartered in San Francisco, California and have operations in the United States, Denmark, Belgium, Canada, China, Colombia, Finland, France, Germany, Ireland, Israel, Japan, Lithuania, Singapore, South Korea, Spain, Sweden, and the United Kingdom.
We market our solutions directly through our online store and field sales operations in North America, Denmark, China, Finland, Germany, Israel, Japan, Singapore, South Korea, and Spain, and indirectly through independent distributors and resellers worldwide.
Basis of Presentation and Consolidation
We prepared the accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. The condensed consolidated financial statements include the accounts of Unity Software Inc. and its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In our opinion, the information contained herein reflects all adjustments necessary for a fair presentation of our results of operations, financial position, cash flows, and stockholders’ equity. All such adjustments are of a normal, recurring nature. The results of operations for the three and six months ended June 30, 2021 shown in this report are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any other period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 5, 2021.
There have been no material changes in our significant accounting policies as described in our consolidated financial statements for the year ended December 31, 2020, other than the adoption of accounting pronouncements as described below in Note 2, “Summary of Accounting Pronouncements,” of the Notes to Condensed Consolidated Financial Statements.
8


Unity Software Inc.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. For us, these estimates include, but are not limited to, revenue recognition, allowances for doubtful accounts, fair values of financial instruments, useful lives of fixed assets, the incremental borrowing rate ("IBR") we use to determine our operating lease liabilities, income taxes, valuation of deferred tax assets and liabilities, valuation of intangible assets, useful lives of intangible assets, assets acquired and liabilities assumed through business combinations, fair value of our common stock prior to our IPO, valuation of stock-based compensation, capitalization of software costs and software implementation costs, customer life for capitalized commissions, and other contingencies, among others. Actual results could differ from those estimates, and such differences could be material to our financial position and results of operations.
2. Summary of Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables. This update replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The new impairment methodology eliminates the probable initial recognition threshold and, instead, estimates the expected credit losses in consideration of past events, current conditions and forecasted information. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.
We adopted this new standard effective January 1, 2021, using the modified-retrospective approach, which resulted in a cumulative-effect adjustment of $1.5 million to accumulated deficit. We updated the following accounting policies as a result of the adoption of this guidance.
Accounts Receivable
We record accounts receivable at the original invoiced amount, net of allowances for credit losses for any potential uncollectible amounts. We make estimates of expected credit losses for the allowance for doubtful accounts based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. The estimated credit loss allowance is recorded as a general and administrative expense on our condensed consolidated statement of operations. As of June 30, 2021, the allowance for credit losses was $5.8 million.
9


Unity Software Inc.
Marketable Securities
Our marketable securities consist of investments in U.S. treasury securities, asset-backed securities, corporate bonds, commercial paper, and supranational bonds. We classify our investments in debt securities as available-for-sale at the time of purchase. We consider all debt securities as available for use in current operations, including those with maturity dates beyond one year, and therefore classify these securities as current assets in the consolidated balance sheets. When the fair value of a security is below its amortized cost, the amortized cost will be reduced to its fair value if it is more likely than not that we are required to sell the impaired security before recovery of its amortized cost basis, or we have the intention to sell the security. If neither of these conditions is met, we determine whether the impairment is due to credit losses by comparing the present value of the expected cash flows of the security with its amortized cost basis. The amount of impairment recognized is limited to the excess of the amortized cost over the fair value of the security. An allowance for credit losses for the excess of amortized cost over the expected cash flows is recorded in interest income and other expense, net in our condensed consolidated statements of operations. Impairment losses that are not credit-related are included in accumulated other comprehensive loss in stockholders’ equity.
3. Revenue
Disaggregation of Revenue
Revenue by Source
The following table presents our revenue disaggregated by source (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Create Solutions $ 72,364  $ 55,091  $ 142,751  $ 101,787 
Operate Solutions 182,916  112,513  329,494  216,881 
Strategic Partnerships and Other 18,282  16,727  36,089  32,657 
Total revenue $ 273,562  $ 184,331  $ 508,334  $ 351,325 
Additional information regarding our revenue by source is discussed under the heading “Revenue Recognition” in Note 1, “Description of Business and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements.
10


Unity Software Inc.
Revenue by Geographic Area
The following table presents our revenue disaggregated by geography, based on the invoice address of our customers (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
United States $ 62,566  $ 47,314  $ 119,572  $ 87,803 
Greater China (1)(2)
41,891  24,435  78,440  48,191 
EMEA (1)(3)
105,260  68,303  191,362  132,995 
APAC (1)(4)
53,905  35,237  99,584  65,648 
Other Americas (1)(5)
9,940  9,042  19,376  16,688 
Total revenue $ 273,562  $ 184,331  $ 508,334  $ 351,325 
(1)    No individual country, other than those disclosed above, exceeded 10% of our total revenue for any period presented.
(2)    Greater China includes China, Hong Kong, and Taiwan.
(3)    Europe, the Middle East, and Africa (“EMEA”)
(4)    Asia-Pacific, excluding Greater China (“APAC”)
(5)    Canada and Latin America (“Other Americas”)
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets relate to performance completed in advance of scheduled billings. The primary changes in our contract assets and contract liabilities are due to our performance under the contracts and billings.
Contract assets (unbilled receivables) included in accounts receivable are recorded when revenue is recognized in advance of customer invoicing. Unbilled receivables totaled $22.0 million and $26.3 million as of June 30, 2021 and December 31, 2020, respectively. Contract liabilities (deferred revenue) relate to payments received in advance of performance under the contract. Revenue recognized during the three and six months ended June 30, 2021 that was included in the deferred revenue balances at April 1, 2021 and January 1, 2021 was $48.2 million and $75.2 million, respectively. The satisfaction of performance obligations typically lags behind payments received under contract from customers, which may lead to an increase in our deferred revenue balance over time.
Remaining Performance Obligations
As of June 30, 2021, we had total remaining performance obligations of $220.9 million, which represents the total contract transaction price allocated to undelivered performance obligations primarily for Create Solutions subscriptions, Enterprise Support, and Strategic Partnership contracts, which are generally recognized over the next three years. Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods. This amount excludes contracts with an original expected term of one year or less and contracts for which we recognize revenue in the amount and in the same period in which we invoice for services performed. We expect to recognize $102.0 million or 46% of this revenue during the next 12 months. We expect to recognize the remaining $118.9 million or 54% of this revenue thereafter.
11


Unity Software Inc.
4. Cash Equivalents and Marketable Securities
Cash equivalents and marketable securities consisted of the following as of June 30, 2021 (in thousands):
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Cash equivalents:
Money market funds $ 93,223  $ —  $ —  $ 93,223 
Commercial paper 66,720  —  —  66,720 
Total cash equivalents $ 159,943  $ —  $ —  $ 159,943 
Marketable securities:
Asset-backed securities $ 48,407  $ 22  $ (6) $ 48,423 
Corporate bonds 140,168  28  (81) 140,115 
U.S. treasury securities 327,050  67  (42) 327,075 
Supranational bonds 71,508  (47) 71,467 
Total marketable securities $ 587,133  $ 123  $ (176) $ 587,080 
Cash equivalents and marketable securities consisted of the following as of December 31, 2020 (in thousands):
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Cash equivalents:
Money market funds $ 660,086  $ —  $ —  $ 660,086 
Commercial paper 75,726  —  —  75,726 
Total cash equivalents $ 735,812  $ —  $ —  $ 735,812 
Marketable securities:
Asset-backed securities $ 49,950  $ 54  $ (39) $ 49,965 
Corporate bonds 92,312  31  (21) 92,322 
U.S. treasury securities 327,025  81  (56) 327,050 
Supranational bonds 10,066  (1) 10,069 
Total marketable securities $ 479,353  $ 170  $ (117) $ 479,406 
We do not intend to sell any of the securities in an unrealized loss position and we expect to realize the full value of all these investments which may be upon maturity. We did not recognize any credit losses related to our available-for-sale debt securities during the three and six months ended June 30, 2021.
The following table summarizes the amortized cost and fair value of our marketable securities as of June 30, 2021, by contractual years to maturity (in thousands):
Amortized Cost Fair Value
Due within one year $ 355,765  $ 355,865 
Due between one and three years 231,368  231,215 
Total $ 587,133  $ 587,080 
There were no material realized or unrealized gains or losses, either individually or in the aggregate.
12


Unity Software Inc.
5. Fair Value Measurements
We categorize assets and liabilities recorded or disclosed at fair value on our consolidated balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.
The following table presents the fair value of our financial assets and liabilities measured at fair value on a recurring basis using the above input categories as of June 30, 2021 (in thousands):
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 93,223  $ —  $ —  $ 93,223 
Commercial paper —  66,720  —  66,720 
Total cash equivalents $ 93,223  $ 66,720  $ —  $ 159,943 
Marketable securities:
Asset-backed securities $ —  $ 48,423  $ —  $ 48,423 
Corporate bonds —  140,115  —  140,115 
U.S. treasury securities —  327,075  —  327,075 
Supranational bonds —  71,467  —  71,467 
Total marketable securities $ —  $ 587,080  $ —  $ 587,080 
The following table presents the fair value of our financial assets and liabilities measured at fair value on a recurring basis using the above input categories as of December 31, 2020 (in thousands):
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 660,086  $ —  $ —  $ 660,086 
Commercial paper —  75,726  —  75,726 
Total cash equivalents $ 660,086  $ 75,726  $ —  $ 735,812 
Marketable securities:
Asset-backed securities $ —  $ 49,965  $ —  $ 49,965 
Corporate bonds —  92,322  —  92,322 
U.S. treasury securities —  327,050  —  327,050 
Supranational bonds —  10,069  —  10,069 
Total marketable securities $ —  $ 479,406  $ —  $ 479,406 
13


Unity Software Inc.
6. Acquisitions
Acquisitions are accounted for in accordance with FASB ASC Topic 805, Business Combinations, and the revenue and earnings of the acquired businesses have been included in our results from the respective dates of the acquisitions and were not material to our condensed consolidated financial statements.
The total purchase price allocated to the net assets acquired is assigned based on the fair values as of the date of acquisition. The fair value assigned to identifiable intangible assets acquired was determined using the income approach and the cost approach. We believe that these identified intangible assets will have no residual value after their estimated economic useful lives. The identifiable intangible assets are subject to amortization on a straight-line basis, as this best approximates the benefit period related to these assets.
The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, is recorded as goodwill. Goodwill is not subject to amortization and it typically is not deductible for U.S. income tax purposes.
For 2021 and certain 2020 acquisitions, the fair values of assets acquired and liabilities assumed, including current income taxes payable and deferred taxes, may change over the measurement period as additional information is received and certain tax returns are finalized. Accordingly, the provisional measurements of fair value of the current income taxes payable and deferred taxes are subject to change. We expect to finalize the valuation as soon as practicable, but not later than one year from the respective acquisition dates.
2021 Acquisitions
Metaverse Technologies Limited
In June 2021, we completed the acquisition of 100% of the issued share capital of Metaverse Technologies Limited ("Metaverse") for consideration of $45.7 million in cash.
Metaverse is a software company that develops first class software and solutions to help take the best out of computer-aided design ("CAD") data, reducing time and efforts and maximizing visualization performance. Metaverse bridges the gap between complex models that are made for design or engineering and the real-time 3D world.
The following table summarizes the consideration paid for Metaverse and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
Consideration:
Cash $ 45,710 
Fair value of total consideration transferred $ 45,710 
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash $ 1,096 
Intangible assets 12,340 
Other assets and liabilities, net 196 
Income and other taxes payable (1,470)
Other payable (345)
Deferred tax liability (2,285)
Total identifiable net assets assumed 9,532 
Goodwill 36,178 
Total $ 45,710 
14


Unity Software Inc.
We recorded $0.6 million and $0.8 million in transaction costs associated with the Metaverse acquisition for the three and six months ended June 30, 2021, respectively. These costs were recorded within general and administrative expenses.
Pro forma results of operations for the Metaverse acquisition have not been presented because the acquisition is not material to the condensed consolidated statements of operations and comprehensive loss.
Other 2021 Acquisition
During the six months ended June 30, 2021, we completed the acquisition of Visual Live 3D LLC ("Visual Live") for total consideration of approximately $24.8 million payable in cash. In aggregate, $5.1 million was attributed to intangible assets and represents acquired developed technology, customer relationships, and trademarks, $0.6 million was attributed to other assets, $19.8 million was attributed to goodwill and $0.6 million was attributed to other liabilities assumed. This acquisition was strategic in nature as it enhanced our product offerings.
We recorded $0.6 million in transaction costs associated with this acquisition for the six months ended June 30, 2021. These costs were recorded within general and administrative expenses.
Pro forma results of operations for this acquisition have not been presented because the acquisition is not material to the condensed consolidated statements of operations and comprehensive loss.
7. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of purchase price and related costs over the value assigned to net tangible and identifiable intangible assets acquired in business combinations.
The following table presents the changes in the carrying amount of goodwill for the six months ended June 30, 2021 (in thousands):
Balance as of December 31, 2020 $ 286,251 
Goodwill from Visual Live acquisition 19,779 
Goodwill from Metaverse acquisition 36,178 
Measurement period adjustments (74)
Balance as of June 30, 2021 $ 342,134 
15


Unity Software Inc.
Intangible Assets, Net
The following tables present details of our intangible assets, excluding goodwill (in thousands, except for weighted-average useful life):
As of June 30, 2021
Weighted-Average
Useful Life
(1)
(In Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Developed technology 5.8 $ 96,074  $ (38,839) $ 57,235 
Customer relationships 2.3 17,951  (10,941) 7,010 
Trademark 3.2 3,907  (2,451) 1,456 
Total intangible assets $ 117,932  $ (52,231) $ 65,701 
As of December 31, 2020
Weighted‑Average
Useful Life
(1)
(In Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Developed technology 5.8 $ 83,688  $ (32,342) $ 51,346 
Customer relationships 2.2 13,327  (8,682) 4,645 
Trademark 3.3 3,507  (2,039) 1,468 
Total intangible assets $ 100,522  $ (43,063) $ 57,459 
(1)    Based on weighted-average useful life established as of the acquisition date.
The following table presents the amortization of finite-lived intangible assets included on our condensed consolidated statements of operations and comprehensive loss (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Amortization expense $ 4,709  $ 4,150  $ 9,168  $ 8,294 
As of June 30, 2021, the estimated future amortization of finite-lived intangible assets for each of the next five years and thereafter was as follows (in thousands):
Remainder of 2021 $ 10,114 
2022 17,878 
2023 14,434 
2024 13,284 
2025 7,123 
Thereafter 2,868 
Total $ 65,701 
16


8. Balance Sheet Components
The following tables provide details of selected balance sheet items (in thousands):
As of
June 30,
2021
December 31,
2020
Property and equipment, net:
Gross property and equipment
Leasehold improvements $ 69,939  $ 65,669 
Computer and other hardware 65,886  58,568 
Furniture 25,068  23,685 
Internally developed software 2,043  3,301 
Purchased software 1,407  1,436 
Construction in progress 15,133  13,343 
Total gross property and equipment 179,476  166,002 
Accumulated depreciation and amortization (1)
(83,528) (70,458)
Property and equipment, net $ 95,948  $ 95,544 
(1)    The following table presents the depreciation and amortization of property and equipment included on our condensed consolidated statements of operations and comprehensive loss (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Depreciation and amortization expense $ 7,561  $ 6,050  $ 14,934  $ 11,716 
Long-lived Assets, Net, by Geographic Area
The following table presents our long-lived assets, net, disaggregated by geography, which consists of our property and equipment, net, but excludes internally developed software and purchased software (in thousands):
As of
June 30,
2021
December 31,
2020
United States $ 32,087  $ 35,494 
Canada 25,881  20,063 
United Kingdom 16,380  17,846 
Greater China 4,861  5,653 
EMEA, excluding United Kingdom (1)
11,588  11,181 
APAC (1)
2,961  3,546 
Other Americas, excluding Canada (1)
778  809 
Total long-lived assets, net $ 94,536  $ 94,592 
(1)    No individual country, other than those disclosed above, exceeded 10% of our total long-lived assets, net, for any period presented.
17


As of
June 30,
2021
December 31,
2020
Accrued expenses and other current liabilities:
Accrued expenses $ 73,583  $ 53,535 
Accrued compensation 54,559  52,771 
Accrued expenses and other current liabilities $ 128,142  $ 106,306 
Sales Commissions
We consider internal sales commissions as potential incremental costs of obtaining the contract with a customer. We apply a practical expedient to expense incremental costs incurred if the period of the benefit is one year or less. Incremental costs that have a period of benefit greater than one year are capitalized and amortized over the estimated period of benefit. Capitalized commissions, net of amortization, are included in other current assets and other assets on our condensed consolidated balance sheets. We capitalized $6.6 million and $8.8 million of sales commissions for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively.
As of June 30, 2021, capitalized commissions, net of amortization, included in other current assets and other assets were $5.1 million and $6.5 million, respectively. Capitalized commissions, net of amortization, included in other current assets and other assets were $2.9 million and $4.4 million, respectively, as of December 31, 2020.
Capitalized commissions are amortized over the expected period of benefit, which we have determined, based on analysis, to be three years. Amortization of capitalized commissions are included in sales and marketing expenses on our condensed consolidated statements of operations and comprehensive loss. For the three months ended June 30, 2021 and 2020, we amortized $1.3 million and $0.2 million of capitalized commissions, respectively. For the six months ended June 30, 2021 and 2020, we amortized $2.3 million and $0.4 million of capitalized commissions, respectively. We did not incur any impairment losses for the six months ended June 30, 2021 and 2020.
9. Leases
We have operating leases for offices and equipment, which have remaining lease terms of less than one year to 10.5 years, some of which include options to extend the lease with renewal terms from one to five years. Some leases include an option to terminate the lease from less than one year up to five years from the lease commencement date.
Components of lease expense were as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating lease expense, excluding ROU asset impairment $ 7,407  $ 7,680  $ 14,708  $ 14,793 
Short-term lease expense 125  220  242  527 
Variable lease expense 1,471  1,135  2,446  2,835 
Sublease income (93) (8) (186) (26)
Total lease expense $ 8,910  $ 9,028  $ 17,210  $ 18,129 
18


Other information related to operating leases was as follows (in thousands):
Six Months Ended June 30,
2021 2020
Cash paid for amounts included in the measurement of operating lease liabilities $ 15,532  $ 13,569 
Operating lease ROU assets obtained in exchange for new operating lease liabilities $ 18,999  $ 23,834 
As of June 30, 2021, our operating leases had a weighted-average remaining lease term of 6.25 years and a weighted-average discount rate of 4.3%.
As of June 30, 2021, future minimum lease payments under our non-cancellable operating leases were as follows (in thousands):
Operating Leases (1)
Remainder of 2021 $ 15,503 
2022 29,902 
2023 24,422 
2024 21,307 
2025 16,290 
Thereafter 41,875 
Total future minimum lease payments 149,299 
Less: imputed interest (18,942)
Present value of lease liabilities $ 130,357 
(1)    Excludes future minimum payments for leases which have not yet commenced as of June 30, 2021.
In August 2018, we entered into a lease agreement for approximately 150,000 square feet of office space in San Francisco, California. In June 2021, we entered into an agreement to terminate the lease, which involved a one-time payment of $43.5 million, all of which was recorded in general and administrative expense on our condensed consolidated statement of operations.
10. Borrowings
On December 20, 2019, we entered into a revolving credit agreement (the Credit Agreement”), which provided for a committed revolving loan facility of up to $125.0 million (the “Revolving Facility”) and included a $20.0 million letter of credit subfacility (the “LC Capacity” and together with the Revolving Facility, the “Credit Facility”). Borrowings under the Credit Facility were available for working capital and general corporate purposes. The Credit Facility had a maturity date of December 20, 2024.
At our option, we were to specify whether the loans made under the Revolving Facility were an Alternate Base Rate (“ABR”) borrowing or a Eurodollar borrowing, which then determined the annual interest rate. ABR borrowings bore interest at the ABR plus 0.50%. Eurodollar borrowings bore interest at the adjusted LIBO Rate plus 1.50%.
The ABR equaled the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50%, and (iii) the sum of the adjusted one-month LIBO Rate for a Eurodollar borrowing plus 1.00%. The ABR was subject to a floor of 1.00%.
For ABR borrowings, interest was payable on the last day of March, June, September, and December of each year. For Eurodollar borrowings, interest was payable on the last day of each interest period for the applicable borrowing, and if such interest period extended over three months, each day prior to the last day of each three-month interval during such interest period.
19


Commitments under the Revolving Facility were subject to a commitment fee of 0.25% on the difference between the total committed amount of the Revolving Facility on the one hand, and the amount drawn thereunder plus the aggregate amount of LC Capacity used on the other. An annual letter of credit fee of 1.50% of the average daily undrawn amount of the letters of credit issued thereunder was also payable quarterly. Letters of credit issued under the letter of credit subfacility were subject to a fronting fee of 0.125% on the average daily undrawn amount on such letters of credit.
In March 2020, we borrowed the full $125.0 million amount as a Eurodollar borrowing under the Revolving Facility. In September 2020, we repaid the $125.0 million of indebtedness under the Credit Facility using a portion of the net proceeds we received from our initial public offering ("IPO").
In connection with this borrowing, we recognized $0.6 million and $0.8 million in expense primarily related to the interest cost associated with this borrowing, commitment fees on the undrawn portion and amortization of debt issuance costs during the six months ended June 30, 2021 and 2020, respectively. This amount is reported within “Interest expense” on our condensed consolidated statements of operations and comprehensive loss.
Under the Credit Agreement, we were to maintain a minimum liquidity balance of $75.0 million as of the last day of the most recently completed four consecutive fiscal quarters, which commenced on June 30, 2020. The Credit Agreement contained customary conditions to borrowing, representations and warranties, events of default and covenants, including covenants that restrict our ability to incur indebtedness, grant liens, make investments, undergo corporate changes, make dispositions, prepay other indebtedness, pay dividends or other distributions and engage in transactions with our affiliates. The obligations under the Credit Agreement were secured by a perfected security interest in (i) all of our tangible and intangible assets, except for certain customary excluded assets, and (ii) all of our ownership in capital stock of restricted subsidiaries (limited, in the case of the stock of non-U.S. subsidiaries and U.S. subsidiaries that have no material assets other than equity interests and/or indebtedness in foreign subsidiaries that are controlled foreign corporations, to 65% of the capital stock of such subsidiaries). The obligations under the Credit Agreement were also guaranteed by our existing and subsequently acquired or formed material domestic subsidiaries.
In April 2021, we terminated without penalty our Credit Agreement. There was no outstanding indebtedness under the Credit Facility, and we determined that the Credit Facility was no longer necessary. We were in compliance in all material respects with the covenants in the Credit Agreement through April 2021, when the Credit Agreement was terminated.
11. Commitments and Contingencies
The following table summarizes our non-cancelable contractual commitments as of June 30, 2021 (in thousands):
Total Remainder of 2021 2022‑2023 2024‑2025
Purchase commitments (1)
$ 119,294  $ 15,036  $ 88,633  $ 15,625 
(1)    The substantial majority of our purchase commitments are related to agreements with our data center hosting providers.
Data Center Hosting Commitments
In March 2018, we entered into a cloud service agreement with a total term of six years. Under the agreement, we were granted access to use certain cloud services. Minimum annual commitments increase annually over the term of the agreement. The aggregate value of all annual minimum commitments over the contract term is $210.5 million. Total spend under the agreement for the three months ended June 30, 2021 and 2020 was approximately $28.2 million and $16.3 million, respectively. Total spend under the agreement for the six months ended June 30, 2021 and 2020 was approximately $53.8 million and $28.1 million, respectively. We expect to meet our remaining commitment.
20


Table of Contents
Unity Software Inc.
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 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.
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, 2021, there were no known events or circumstances that have resulted in a material indemnification liability to us and we did not incur material costs to defend lawsuits or settle claims related to these indemnifications.
Letters of Credit
We had $10.8 million and $21.4 million of secured letters of credit outstanding as of June 30, 2021 and December 31, 2020, respectively. These primarily relate to our office space leases and are fully collateralized by certificates of deposit which we record in restricted cash on our condensed consolidated balance sheets based on the term of the remaining restriction.
12. Stockholders’ Equity and Employee Compensation Plans
Common Stock
In January 2020, we sold 4.5 million shares of our common stock. The total transaction price of the common stock issued was $100.0 million.
2020 Equity Incentive Plan
In succession to and continuation of our 2019 Stock Plan, our board of directors approved our 2020 Equity Incentive Plan (“2020 Plan”) in August 2020, and our stockholders approved in September 2020. No grants were made under our 2020 Plan prior to its effectiveness on September 17, 2020. As our 2020 Plan has become effective, no further grants will be made under our 2019 Stock Plan. In addition, shares subject to outstanding stock awards granted under our 2009 Stock Plan and 2019 Stock Plan that expire, or are forfeited, cancelled, withheld, or reacquired become available for grant pursuant to the 2020 Plan.
The 2020 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other forms of awards to employees, directors, and consultants, including employees and consultants of our affiliates.
The exercise price of stock options granted under the 2020 Plan must be at least equal to the fair market value of a share of our common stock on grant date and the exercise price of incentive stock options granted to any participant, who owns more than 10% of the total voting power of all classes of our outstanding stock, must be at least 110% of the fair market value on the grant date.
The term of a stock option and stock appreciation right may not exceed 10 years, except with respect to any participant who owns 10% of the voting power of all classes of our outstanding stock, the term of an incentive stock option may not exceed five years.
21


As of June 30, 2021, we had reserved a total of 84.0 million shares of common stock under the 2020 Plan, of which 37.8 million were available for grant.
2020 Employee Stock Purchase Plan
Our board of directors also adopted our 2020 Employee Stock Purchase Plan ("2020 ESPP") in August 2020, and our stockholders approved our 2020 ESPP in September 2020.
The maximum number of shares of our common stock that may be issued under our 2020 ESPP is 8,023,463 shares, all of which were available for issuance as of June 30, 2021. Our 2020 ESPP permits participants to purchase shares of our common stock through payroll deductions of up to 15% of their earnings. Unless otherwise determined by the administrator, the purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the first day of an offering or on the date of purchase. Participants may end their participation at any time during an offering and will be paid their accrued contributions that have not yet been used to purchase shares. Participation ends automatically upon termination of employment with us. As of June 30, 2021, we had not yet launched our 2020 ESPP and were under no obligation to do so.
13. Stock‑Based Compensation
We recorded stock-based compensation expense related to grants to employees, including those in connection with modified awards, on our condensed consolidated statements of operations as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Cost of revenue $ 5,340  $ 690  $ 10,457  $ 1,247 
Research and development 33,227  5,990  64,877  10,779 
Sales and marketing 14,523  2,277  26,560  4,124 
General and administrative 32,310  3,006  50,067  5,504 
Total stock-based compensation expense $ 85,400  $ 11,963  $ 151,961  $ 21,654 
As of June 30, 2021, there was unrecognized compensation expense related to outstanding stock options of $128.5 million to be recognized over the weighted-average remaining vesting period of 2.07 years. As of June 30, 2021, there was unrecognized compensation expense related to unvested restricted stock units of $710.1 million to be recognized over the weighted-average remaining vesting period of 3.14 years. In future periods, stock-based compensation expense may increase as we issue additional equity-based awards to continue to attract and retain employees.
In March 2021, we entered into a separation agreement with our former Chief Financial Officer. The agreement provided for payment of a one-time lump-sum severance benefit of $0.3 million, payment for coverage under COBRA or applicable state law until November 30, 2021, a standard release of claims against us and a partial acceleration and extension of the exercise period of her outstanding equity awards. The stock-based compensation expense totaled $12.6 million in connection with the modified equity awards, of which $2.1 million, along with the one-time lump-sum severance benefit of $0.3 million, were recorded in general and administrative expense in the three months ended March 31, 2021. The remaining $10.5 million of stock-based compensation expense was recorded in general and administrative expense in the three months ended June 30, 2021.
22


Table of Contents
Unity Software Inc.
Stock Options
A summary of our stock option activity under the 2009 Stock Plan, 2019 Stock Plan, and 2020 Plan is as follows:
Options Outstanding
Stock
Options
Outstanding
Weighted-Average
Exercise
Price
Weighted-Average
Remaining
Contractual
Term
(In Years)
Balance as of December 31, 2020 40,457,875  $ 8.03  6.87
Granted 1,196,458  $ 104.32 
Exercised (6,831,982) $ 5.59 
Forfeited, cancelled, or expired (547,439) $ 11.75 
Balance as of June 30, 2021 34,274,912  $ 11.82  6.57
The calculated grant-date fair value of stock options granted was estimated using the Black-Scholes option-pricing model with the following assumptions:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Expected dividend yield
Risk-free interest rate
1.1% - 1.2%
0.4% - 0.5%
0.9% - 1.2%
0.4% - 0.6%
Expected volatility
36.1% - 36.2%
35.7% - 36.3%
36.0% - 36.2%
33.8% - 36.3%
Expected term (in years) 6.25 6.00 6.25 6.00
Fair value of underlying common stock
$100.60 - $103.86
$25.72
$100.60 - $108.10
$22.00 - $25.72
For stock options granted prior to our IPO, the expected term is based on the vesting terms, estimated exercise behavior, post-vesting cancellations and contractual terms of the awards. For stock options granted after our IPO, we estimate the expected term using the simplified method as specified under Staff Accounting Bulletin Topic 14, which utilizes the midpoint between the stock options' vesting date and the end of the contractual term. We do not plan to pay cash dividends in the foreseeable future; therefore, we used an expected dividend yield of zero. The risk-free interest rate is based on U.S. Treasury rates in effect at the time of grant with maturities equal to the grant’s expected term. The expected volatility is based on historical volatility of peer companies. The fair value of common stock is estimated based on observable transactions in the secondary market for stock options granted prior to our IPO and based on the grant-date closing price of our common stock for stock options granted after our IPO.
23


Table of Contents
Unity Software Inc.
Restricted Stock Units (“RSUs”)
A summary of our RSU activity under the 2019 Stock Plan and 2020 Plan is as follows:
Unvested Restricted Stock Units
Number of
Shares
Weighted-Average
Grant-Date
Fair Value
Unvested as of December 31, 2020 9,561,791  $ 53.79 
Granted 3,657,958  $ 105.57 
Vested (1,003,807) $ 41.17 
Forfeited (272,700) $ 66.37 
Unvested as of June 30, 2021 11,943,242  $ 70.42 
The RSUs granted prior to our IPO are subject to both a service-based vesting condition, which is satisfied over one to four years, and a liquidity event vesting condition, which was satisfied upon the completion of our IPO. The RSUs granted subsequent to our IPO only have a service-based vesting condition, which is satisfied over approximately one year to four years.
14. Income Taxes
Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, we update the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to volatility due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in how we do business, and tax law developments.
Our effective tax rate for the three and six months ended June 30, 2021 differs from the U.S. federal statutory tax rate of 21% primarily due to foreign earnings being taxed at different tax rates, credits and losses that cannot be benefited due to the valuation allowance on United States and Denmark entities, the tax benefit from stock-based compensation activities during the period, and the tax impact related to the United Kingdom corporate tax rate change, effective April 1, 2023, that was enacted during the period. Our effective tax rate for the three and six months ended June 30, 2020 differs from the U.S. federal statutory tax rate of 21% primarily due to foreign earnings being taxed at different tax rates, credits and losses that cannot be benefited due to the valuation allowance on United States and Denmark entities, and reversal of unrecognized tax benefits due to statute of limitation expiration.
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We regularly assess the ability to realize our deferred tax assets and establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses, we believe that it is more likely than not that our U.S. federal, certain state, Denmark, and certain non-U.S. jurisdictions deferred tax assets will not be realized as of June 30, 2021 and December 31, 2020, and as such, we have maintained a full valuation allowance against such deferred tax assets.
24


Table of Contents
Unity Software Inc.
As of June 30, 2021, we had $86.7 million of gross unrecognized tax benefits, of which $10.2 million would impact the effective tax rate, if recognized. It is reasonably possible that the amount of unrecognized tax benefits as of June 30, 2021 could increase or decrease significantly due to the lapse of statutes of limitations within the next 12 months. As a result, the amount of unrecognized tax benefits may decrease by as much as $2.3 million. We believe that we have adequately provided for any reasonably foreseeable outcome related to our tax audits and that any settlement will not have a material impact on our financial condition and operating results at this time.
15. Net Loss per Share of Common Stock
Basic net loss per share attributable to our common stockholders is computed using the weighted-average number of common shares outstanding during the period, less shares subject to repurchase. Diluted net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were antidilutive given our net loss in each period presented. Potentially dilutive common shares result from the assumed exercise of outstanding stock options and assumed vesting of outstanding RSUs, both using the treasury stock method.
The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Basic and diluted net loss per share
Numerator:
Net loss attributable to our common stockholders $ (148,342) $ (27,351) $ (255,802) $ (54,087)
Denominator:
Weighted-average common shares used in per share computation, basic and diluted 280,374  129,826  278,233  128,804 
Net loss per share, basic and diluted $ (0.53) $ (0.21) $ (0.92) $ (0.42)
The following table presents the forms of antidilutive potential common shares excluded from the computation of diluted net loss per share for the following periods (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Convertible preferred stock —  102,717  —  102,717 
Stock options 34,275  46,217  34,275  46,217 
RSUs 11,943  —  11,943  — 
16. Subsequent Events
In July 2021, we completed the acquisition of a company that provides tools for artists to create complex, realistic 3D vegetation assets for purchase consideration of approximately $20.0 million.
In July 2021, we signed an agreement to purchase a company that designs and develops remote access streaming technology for purchase consideration of $320.0 million. The acquisition is expected to close in the third quarter of the year ending December 31, 2021 subject to closing conditions.
In August 2021, we completed the acquisition of a company that provides an application that allows consumers to create and share their own experiences for purchase consideration of approximately $20.0 million.
25


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. 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 II—Other Information, 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 are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled “Note Regarding Forward-Looking Statements” in this report. These 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.
Overview
Unity is the world’s leading platform for creating and operating interactive, real-time 3D ("RT3D") content.
Our platform provides a comprehensive set of software solutions to create, run, and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.
Our platform consists of two distinct, but connected and synergistic, sets of solutions: Create Solutions and Operate Solutions. Our Create Solutions are used by content creators—developers, artists, designers, engineers, and architects—to create interactive, real-time 2D and 3D content. Content can be created once and deployed to more than 20 platforms, including Windows, Mac, iOS, Android, PlayStation, Xbox, Nintendo Switch, and the leading augmented and virtual reality platforms, among others. Our Operate Solutions offer customers the ability to grow and engage their end-user base, as well as run and monetize their content with the goal of optimizing end-user acquisition and operational costs, while increasing the lifetime value of their end users.
We launched our first game development engine in 2004, bringing together a set of tools, such as rendering, lighting, physics, sound, animation, and user interface, that were designed to address the challenges faced by most game developers. Prior to Unity, developers primarily created these tools individually and repetitively across different target platforms, which was an expensive and time-consuming process. Unity made game development easier and faster.
In the three months ended June 30, 2021, we built upon our history of innovation by achieving a number of milestones that secured our position as the leading platform for creating and operating interactive, real-time 3D content including those identified below.
Unity continues to increase momentum in non-gaming industries. In the second quarter 2021, Unity added three new automotive manufacturers and also began to work with several consumer product brands, including an eyewear manufacturer and retailer, and an appliance manufacturer known for their advanced designs. Additionally, Unity is getting traction in new markets, including a new contract with The Nature Conservancy to utilize RT3D digital technologies to convey information about water usage in New York state. The Nature Conservancy is a global environment nonprofit with over 1 million members and a diverse staff of over 400 scientists, making them one of the most effective and wide-reaching environmental organizations in the world.
26


Table of Contents
Unity Software Inc.
Unity introduces first-ever sustainability grant. Early in the quarter Unity announced its Unity for Humanity Environment and Sustainability Grant, a first-of-its-kind grant program created to help creators who leverage RT3D for positive environmental change. The grant program, created in collaboration with the United Nations Environment Programme and Project Drawdown, will have its first set of awardees in fall 2021.
Unity acquires PIXYZ and SpeedTree. In Q2, Unity acquired long-time partner Metaverse Technologies, Inc., providers of PIXYZ, the 3D data preparation and optimization software. The acquisition means professional creators can more easily and quickly import 3D data into Unity and optimize models for real-time development. Additionally, in July 2021, Unity acquired Interactive Data Visualization, Inc., the creator of the popular SpeedTree environment creation suite. The acquisition enables a deeper integration of SpeedTree into the Unity ecosystem, enhancing artist authoring workflows and environment creation capabilities.
Unity released synthetic datasets for reduced AI training time and budgets. Unity announced the Unity Computer Vision Datasets in April 2021, aimed at reducing the cost of developing computer vision applications, and more quickly training Artificial Intelligence (AI) for the manufacturing, retail and security industries.
We continue to invest in research and development and to pursue selective acquisitions and partnerships in order to enhance and expand our platform.
Impact of COVID-19
While our total revenue, cash flows, and overall financial condition have not been adversely impacted to date, the COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The full extent to which the COVID-19 pandemic, including any new strains or mutations such as the delta variant, will directly or indirectly impact our business, results of operations, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. Although we may continue to experience a modest adverse impact on our sales of Create Solutions, our pipeline of customer opportunities for our Create Solutions was largely back to normal levels by the end of 2020, as well as our Strategic Partnerships. Additionally, we have seen an increase in demand for our portfolio of products and services within Operate Solutions following the implementation of shelter-in-place orders to mitigate the outbreak of COVID-19, which has resulted in higher levels of end-user engagement in Operate Solutions and an increase in revenue, along with a decrease in operating expense due to materially reduced travel and spending on events and facilities. However, this increased demand for our Operate Solutions and expense reduction will likely moderate over time, particularly as vaccines are becoming widely available, and as shelter-in-place orders and other related measures and community practices evolve. Further, as certain of our customers or partners experience downturns or uncertainty in their own business operations or revenue resulting from the COVID-19 pandemic, they may decrease or delay their spending, request pricing concessions, or seek renegotiations of their contracts, any of which may result in decreased revenue for us. In addition, we may experience customer losses, due to factors including bankruptcy or our customers ceasing operations, which may result in an inability to collect receivables from these customers. In response to the COVID-19 pandemic, we are also requiring or have required substantially all of our employees to work remotely to minimize the risk of the virus to our employees and the communities in which we operate. We are currently planning for our employees to return to in-person offices later this year, however our plans may change if the number of COVID-19 cases rises where our offices are located or if there is an increase in new strains such as the delta variant, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners.
27


Table of Contents
Unity Software Inc.
The global impact of the COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the situation and the effects on our business and operations closely. We do not yet know the full extent of potential impacts on our business or operations or on the global economy as a whole, particularly as the COVID-19 pandemic persists. The rollout of vaccines and the reduction of COVID-19 cases globally could affect the seasonality of our business or boost global GDP growth, which could positively impact our business. However, the return of more in-person activities will result in an increase in our expenses and could result in a range of impacts to our customers, which could impact our business. Given the uncertainty, we cannot reasonably estimate the impact on our future results of operations, cash flows, or financial condition. For additional details, refer to the section titled “Risk Factors.”
Key Metrics
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.
Customers Contributing More Than $100,000 of Revenue
We have a history of strong growth in our customer base. 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 and revenue growth. We expect that trend to continue. We define a customer as an individual or entity that generated revenue during the measurement period. 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 888 and 716 of such customers in the trailing 12 months as of June 30, 2021 and 2020, respectively, demonstrating our ability to grow our revenues with existing customers, and our strong and growing penetration of larger enterprises, including AAA gaming studios and large organizations in industries beyond gaming. While these customers represented the substantial majority of revenue for the six months ended June 30, 2021 and 2020, 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 Operate 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 Operate Solutions revenue 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. Prior period revenue is the trailing 12-month revenue measured as of such prior period end and includes revenue from all customers that contributed revenue during such trailing 12-month period. Current period revenue is the trailing 12-month revenue from these same customers as of the current period end. Our dollar-based net expansion rate includes the effect of any customer renewals, expansion, contraction, and churn but excludes revenue from new customers in the current period.
As of
June 30, 2021 June 30, 2020
Dollar-based net expansion rate 142  % 142  %
Our dollar-based net expansion rate as of June 30, 2021 and 2020, was driven primarily by the sales of additional subscriptions and services to our existing Create Solutions customers, expanded usage among our existing Operate Solutions customers, and improvements in cross-selling our solutions to all of our customers.
28


Table of Contents
Unity Software Inc.
The chart below illustrates our strong relationship with existing customers by presenting our dollar-based net expansion rate as of the end of each of the past eight quarters.
UNITY-20210630_G1.JPG
Results of Operations
The following table summarizes our historical consolidated statements of operations data for the periods indicated (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenue $ 273,562  $ 184,331  $ 508,334  $ 351,325 
Cost of revenue 57,725  40,432  116,459  72,300 
Gross profit 215,837  143,899  391,875  279,025 
Operating expenses
Research and development 154,216  85,108  308,231  166,859 
Sales and marketing 74,888  43,716  144,681  86,975 
General and administrative 135,917  39,920  199,049  77,473 
Total operating expenses 365,021  168,744  651,961  331,307 
Loss from operations (149,184) (24,845) (260,086) (52,282)
Interest expense (485) (656) (600) (788)
Interest income and other expense, net 70  (662) 1,635  1,194 
Loss before provision for income taxes (149,599) (26,163) (259,051) (51,876)
Provision for income taxes (1,257) 1,188  (3,249) 2,211 
Net loss $ (148,342) $ (27,351) $ (255,802) $ (54,087)
29


Table of Contents
Unity Software Inc.
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,
2021 2020 2021 2020
Revenue 100  % 100  % 100  % 100  %
Cost of revenue 21  22  23  21 
Gross margin 79  78  77  79 
Operating expenses
Research and development 56  46  61  47 
Sales and marketing 27  24  28  25 
General and administrative 50  22  39  22 
Total operating expenses 133  92  128  94 
Loss from operations (55) (13) (51) (15)
Interest expense —  —  —  — 
Interest income and other expense, net —  —  —  — 
Loss before provision for income taxes (55) (13) (51) (15)
Provision for income taxes —  (1)
Net loss (55) % (14) % (50) % (16) %
Revenue
We derive revenue from Create Solutions, Operate Solutions, and Strategic Partnerships and Other.
Create Solutions
We generate Create Solutions revenue primarily through the sale of subscription fee arrangements for the use of our products and related support services.
We offer subscription plans at various price points and recognize revenue over a service period that generally ranges from one to three years. We typically bill our customers on a monthly, quarterly or annual basis, depending on the size of the contract. As a result of billing our customers in advance, we record deferred revenue, and a portion of the revenue we report in each period is attributable to the recognition of deferred revenue related to subscription and support agreements that we entered into during previous periods.
We generate additional Create Solutions revenue from the sale of professional services to our subscription customers. These services primarily consist of consulting, integration, training and custom application and workflow development, and may be billed in advance or on a time and materials basis.
Operate Solutions
We generate Operate Solutions revenue through a combination of revenue-share and usage-based business models that we manage as a portfolio of products and services.
30


Table of Contents
Unity Software Inc.
Our monetization products are primarily based on a revenue-share model. These products were introduced in 2014 as our first set of Operate Solutions products and currently account for a substantial majority of our Operate Solutions revenue. We recognize monetization revenue primarily when an end user installs an application after seeing an advertisement (contracted on a cost-per-install basis), and to a lesser extent when an advertisement starts (contracted on a cost-per-impression basis). Our revenue represents the amount we retain from the transaction we are facilitating through our Unified Auction. Actions by operating system platform providers or application stores such as Apple or Google may affect the manner in which we or our customers collect, use and share data from end-user devices. For example, Apple recently implemented a requirement for applications using its mobile operating system, iOS, to affirmatively (on an opt-in basis) obtain an end user’s permission to “track them across apps or websites owned by other companies” or access their device’s advertising identifier for advertising and advertising measurement purposes, as well as other restrictions. If end-users do not opt-in to participate in such tracking as defined by Apple, our ability to monetize through advertising could suffer. The exact effect and implementation of Apple's changes are not yet clear, but we expect these changes to adversely affect our revenue from our monetization products and potentially other Operate Solutions, and such impact could be material.
We also provide cloud-based services to support the ongoing operation of games and applications. These include application hosting services, as well as end-user engagement tools and voice chat services. These services are generally sold based on usage and billed monthly in arrears. Some of our usage-based contracts include a minimum fixed-fee usage amount. We expect that our Operate Solutions beyond monetization, including cloud operations and hosting services, such as Multiplay, which we introduced in 2018, will grow as a percentage of our revenue in the long term as we further scale newer products and services and as we launch additional solutions for gaming customers as well as customers in other industries.
Strategic Partnerships and Other
We generate Strategic Partnerships revenue primarily from partnership contracts with hardware, operating system, device, game console, and other technology providers. Typically, we recognize revenue from these contracts as services are performed. These partnerships are typically multi-year software development arrangements with payments that are either made in advance on a quarterly basis or milestone-based. In addition, certain partners pay us royalties based on the sales of applications sold on their platform that incorporate or use our customized software.
We generate Other revenue primarily from our share of sales from our Asset Store, a marketplace and scaled aggregator for software, content, and tools used in the creation of real-time interactive games and applications, and from our Verified Solutions Partners, which sell software and tools certified for quality and compatibility with our platform.
31


Table of Contents
Unity Software Inc.
Our total revenue is summarized as follows (in thousands, except percentages):
Three Months Ended Six Months Ended
June 30, Change June 30,</