Unity 10-Q — Q3 FY2025

Unity Software Inc.’s Q3 FY2025 10‑Q demonstrates continued revenue growth amid persistent investment‑heavy spending. Revenue rose to $470.6 million, a 4% increase over the prior quarter and a 2% decline versus the nine‑month period, driven by expansion in Grow Solutions and subscription upgrades while Create Solutions services contracted. Gross profit margins improved modestly, yet operating losses widened slightly to a net loss of $126.8 million, reflecting higher interest expense from new convertible‑note issuances and ongoing workforce reductions.

Cash‑flow dynamics show a healthier liquidity position. Operating cash flow increased by $381 million, and financing activities generated $76.1 million in the quarter after a prior year outflow of $357.7 million, largely from convertible‑note proceeds and equity sales. Net cash used in investing activities fell to $18.3 million from $35.97 million a year earlier, and the company’s cash, cash equivalents, and restricted cash rose to $1.91 billion from $1.53 billion, supported by favorable foreign‑exchange effects.

Capital structure remains leveraged, with $2.23 billion in convertible notes and a total equity deficit of $4.05 million. No notes were converted during the period, and the company executed repurchase transactions that generated pre‑tax gains recorded as interest income. Capped call agreements to mitigate dilution incurred net costs of $92.5 million across 2026 and 2030 notes.

Adjusted EBITDA improved to $109 million from $91 million, and the dollar‑based net expansion rate climbed to 103% versus 94% a year earlier, indicating stronger customer retention and upsell. Despite these gains, the accumulated deficit of $4.0 billion signals ongoing operating losses and a likely need for future capital infusions to sustain growth initiatives. The company maintains unchanged critical accounting policies, market‑risk exposure, and internal controls, with no new material risks identified for the quarter.