Unity Software (U) risk factors, FY2024 10-K

Risks Related to Our Business, Operations, and Industry

1. 01We have a history of losses and may not achieve or sustain profitability on a GAAP basis in the future
2. 02We 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
3. 03If we are not able to grow efficiently and manage our costs, we may not achieve profitability on a GAAP basis
4. 04If 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
5. 05Our future success depends on our ability to retain our existing customers, expand their use of our platform and attract new customers. Our marketing efforts may not be successful despite the resources we devote to them
6. 06that customer may choose to adopt different solutions or to continue to employ internally-developed solutions
7. 07The 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
8. 08If we fail to successfully execute our plans to reset our portfolio to focus on our Strategic Portfolio and to right-size our investments, our business will be harmed
9. 09Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at a similar rate, if at all
10. 10Operating system platform providers or application stores may change terms of service, policies or technical requirements applicable to us or our customers, which could adversely impact our business
11. 11If 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
12. 12Our business relies in part on strategic relationships. If we are unable to maintain favorable terms and conditions and business relations with respect to our strategic relationships, our business could be harmed
13. 13We 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
14. 14customers fail to create or operate popular games using our platform, and we are not able to maintain a diversified portfolio of "winners and losers," our results of operations may be adversely affected
15. 15Third parties with whom we do business may be unable to honor their obligations to us or their actions may put us at risk
16. 16We 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
17. 17We provide service-level agreement commitments related to certain of our Create and Grow Solutions customers. If we fail to meet these contractual commitments, our business could be harmed
18. 18If we fail to offer high-quality support, our ability to retain and attract customers could suffer
19. 19Indemnity provisions in various agreements to which we are a party potentially expose us to substantial liability for infringement, misappropriation or other violation of intellectual property rights, data protection and other losses
20. 20Our business could be disrupted by catastrophic events, including health pandemics, militarization, or war
21. 21Conditions in Israel, including political unrest, militarization and war, have impacted and may further adversely affect our operations
22. 22Our current operations are and will continue to be global in scope, creating a variety of operational challenges
23. 23We are exposed to collection and credit risks, which could impact our operating results
24. 24Adverse developments affecting the financial services industry, such as actual events or perceived concerns involving liquidity, defaults or non-performance by financial institutions could adversely affect our financial condition and results of operations
25. 25Fluctuations in currency exchange rates could harm our operating results and financial condition
26. 26We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all
27. 27We may fail to realize the possible platform advantages between our Create and Grow Solutions, or those advantages may take longer to realize than expected

Risks Related to Our Platform and Technology

1. 28If 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
2. 29Interruptions, performance problems, or defects associated with our platform may adversely affect our business, financial condition, and results of operations
3. 30We are increasingly building AI into certain of our offerings, and issues raised by the use of AI in our offerings may adversely affect our business, reputation, or financial results
4. 31our services, or otherwise experience their own vulnerabilities, policy violations, credential exposure or security breaches, even if we are not the cause of a resulting customer security issue or incident, our customer relationships reputation, and revenue may be adversely impacted
5. 32We 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
6. 33Any failure to obtain, maintain, protect or enforce our intellectual property and proprietary rights could impair our ability to protect our proprietary technology and our brand
7. 34impair the functionality of our platform, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation
8. 35While most of the intellectual property we use is created by us, we have also acquired rights to proprietary intellectual property that provide key features and functionality in our solutions. We have also obtained rights to use intellectual property through licenses and service agreements with third parties
9. 36We have been and may in the future become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business
10. 37We use open source software in our solutions, which could negatively affect our ability to sell our services or subject us to litigation or other actions

Risks Related to Our Management, Talent, and Brand

1. 38Attracting, managing, and retaining our talent is critical to our success
2. 39If 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

Risks Related to Laws, Regulations, and the Global Economy

1. 40As we embark on a comprehensive rebuild of our machine learning stack and data infrastructure, we may encounter challenges in complying with data privacy and similar laws aimed at regulating technology
2. 41us to target advertisements. Other browsers, such as Firefox and Safari, have already adopted similar measures
3. 42Our customers have sought increasingly stringent contractual obligations regarding privacy and data security. These contractual obligations, and our efforts to comply with them, could be costly and harm our business
4. 43Companies and governmental agencies may restrict access to our platforms, website, mobile applications, application stores or the Internet generally, which could lead to the loss or slower growth of our customers' end users and negatively impact our operations
5. 44Adverse changes in the geopolitical relationship between the U.S. and China or changes in China's economic and regulatory landscape could have an adverse effect on business conditions
6. 45We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations
7. 46Compliance with such laws is costly, we cannot assure you that none of our employees and agents will take actions in violation of our policies and applicable law, for which we may be ultimately held responsible
8. 47We are subject to governmental export and import controls and economic sanctions laws that could impair our ability to compete in global markets or subject us to liability if we violate the controls
9. 48and regulations of the United States and potentially other jurisdictions in which we have operations. Compliance with such laws and regulations can be time-consuming and may result in the delay or loss of sales opportunities
10. 49Sales to government entities and highly regulated organizations are subject to a number of challenges and risks
11. 50We could be required to collect additional sales, value added or similar taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our solutions and adversely affect our results of operations
12. 51Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations
13. 52Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate
14. 53Our ability to use our net operating losses, credits, and certain other tax attributes to offset future taxable income or taxes may be subject to certain limitations
15. 54The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes
16. 55Any legal proceedings, claims against us, or other disputes could be costly and time-consuming to defend and could harm our reputation regardless of the outcome
17. 56We are subject to laws and regulations worldwide, many of which are unsettled and still developing and which could increase our costs or adversely affect our business

Risks Related to Our Convertible Notes

1. 57Our Notes and the issuance of shares of our common stock upon conversion of the Notes, if any, may impact our financial results, result in dilution to our stockholders, create downward pressure on the price of our common stock, and restrict our ability to raise additional capital or to engage in a beneficial takeover
2. 58The conditional conversion feature of the 2026 Notes, if triggered, and the conversion feature of the 2027 Notes may adversely affect our financial condition and operating results
3. 59The capped call transactions may affect the value of the 2026 Notes and our common stock
4. 60We are subject to counterparty risk with respect to the Capped Call Transactions

Risks Related to Ownership of Our Common Stock

1. 61Our stock price has been and may continue to be volatile, and the value of our common stock may decline
2. 62Future sales of our common stock in the public market could cause the market price of our common stock to decline
3. 63Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders
4. 64We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
5. 65If we are unable to maintain proper and effective internal controls over financial reporting, investor confidence in our company may be adversely affected and, as a result, the value of our common stock may be impacted
6. 66Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock