DEF: Unity Exceeds 2025 Targets, Overhauls Executive Pay

Sentiment:

Annual Meeting Proxy Statement 27 March 2026 4:19 PM

Unity Software Inc. announces strong 2025 financial results, exceeding revenue and EBITDA targets, while implementing significant reforms to executive compensation and dilution policies following stockholder feedback.

Capital raiseIn July 2022, Unity entered into an Investment Agreement with entities affiliated with Silver Lake and Sequoia Capital (PIPE Investors) for the issuance and sale of $1,000,000,000 in aggregate principal amount of 2.0% Convertible Senior Notes due 2027 (2027 Notes).The PIPE Transaction closed in November 2022 upon the closing of the merger with ironSource.As of December 31, 2025, there was $1,000,000,000 in aggregate principal amount outstanding.Unity paid $20,000,000 in interest on these notes in 2025.The 2027 Notes are convertible into cash, shares of common stock, or a combination, at Unity's election, at an initial conversion rate of 20.4526 shares per $1,000 principal amount (equivalent to an initial conversion price of approximately $48.89 per share).

Better than expectedAdjusted EBITDA Margin for 2025 was 22.1%, exceeding the 21.5% gate.Total revenue for 2025 was $1,849 million, exceeding the target of $1,841 million.This resulted in a bonus attainment of 106% for the corporate metric, marking the first time in three years that bonus payout thresholds were met.Stock-Based Compensation (SBC) as a percentage of total revenue decreased from 33% in 2024 to 21% in 2025, aligning with or positioning below compensation peer group medians.Net income (loss) improved from ($664,287,000) in 2024 to ($401,493,000) in 2025.

Summary

Unity Software Inc. will hold its Annual Meeting of Stockholders virtually on Wednesday, May 13, 2026, at 9:00 a.m. Pacific Time.
Stockholders will vote on the election of three Class III directors (Matthew Bromberg, Keisha Smith, James Whitehurst) to serve until the 2029 annual meeting.
The appointment of Ernst & Young LLP as the independent registered public accounting firm for the year ending December 31, 2026, will be ratified.
An advisory vote on the compensation of named executive officers will be conducted.
The record date for voting is March 20, 2026, with 436,330,028 shares of common stock outstanding.
The Board will increase to ten members with Bernard Kim joining as a Class I director effective May 1, 2026, and Mary Schmidt Campbell retiring, reducing the Board to nine members immediately prior to the Annual Meeting.
The company made significant changes to its executive compensation program in response to stockholder feedback, including increasing performance-based equity (PSUs) to 50% of annual awards for senior executives in 2026 and introducing Adjusted EBITDA Less Stock-Based Compensation Expense Margin as a performance metric.
Unity suspended its 2020 Employee Stock Purchase Plan (ESPP) and reduced the automatic annual share reserve increase for its 2020 Equity Incentive Plan to mitigate dilution.
The company achieved an Adjusted EBITDA Margin of 22.1% and total revenue of $1,849 million in 2025, exceeding pre-established targets for bonus payouts.
Jarrod Yahes was appointed as Senior Vice President, Chief Financial Officer in January 2025.
Anirma Gupta ceased serving as Senior Vice President, Chief Legal Officer and Corporate Secretary in November 2025 and will depart on May 15, 2026.
The first tranche of Performance Stock Options (PSOs) for Matthew Bromberg and Alexander Blum vested on September 5, 2025, after the $35 stock price hurdle was met.
The company paid $20,000,000 in interest on $1,000,000,000 aggregate principal amount of 2.0% Convertible Senior Notes due 2027 to entities affiliated with Silver Lake and Sequoia Capital in 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing as generally positive due to improved financial performance exceeding targets and proactive steps taken to address stockholder concerns regarding executive compensation and dilution. However, the low Say-on-Pay vote indicates lingering investor dissatisfaction that the company is actively working to mitigate.

Positives

Achieved an Adjusted EBITDA Margin of 22.1% in 2025, exceeding the 21.5% gate for bonus payouts.
Total revenue for 2025 was $1,849 million, above the pre-established target of $1,841 million, leading to a 106% bonus attainment for the corporate metric.
Net Burn Rate declined significantly from 2023, and Stock-Based Compensation (SBC) as a percentage of total revenue decreased from 33% in 2024 to 21% in 2025, aligning with or positioning below compensation peer group medians.
The first tranche of Performance Stock Options (PSOs) for CEO Matthew Bromberg and COO Alexander Blum vested on September 5, 2025, after the $35 stock price hurdle was achieved.
The Human Capital and Compensation Committee (HCCC) significantly increased the performance-based component of annual equity grants to senior executives to 50% PSUs and 50% RSUs for 2026, demonstrating responsiveness to stockholder feedback.
A new metric, Adjusted EBITDA Less Stock-Based Compensation Expense Margin, was adopted for PSUs to encourage prudent stewardship of the company's equity program.
The maximum payout for PSUs awarded in 2026 was increased to 200% of target, incentivizing strong financial performance.
All directors and officers who have served for more than the Initial Period have achieved the applicable stock ownership guidelines as of December 31, 2025.

Negatives

The advisory vote on executive compensation (Say-on-Pay) for 2024 received approximately 44% support, indicating significant stockholder dissatisfaction.
Experienced significant leadership transitions and organizational changes during 2025, including the departure of the Chief Legal Officer and Felix Th ceasing to be an executive officer due to restructuring.
Conducted a comprehensive engagement program with institutional investors due to stockholder dissatisfaction with executive compensation.
Anirma Gupta, former SVP, Chief Legal Officer and Corporate Secretary, ceased serving in her role in November 2025 and will depart in May 2026.
The 2020 Employee Stock Purchase Plan (ESPP) was suspended, which, while framed as a dilution mitigation strategy, removes an employee benefit.

Risks

Strategic risk exposure, including determining the nature and level of risk appropriate for the Company.
Major financial risk exposures and the effectiveness of management's monitoring and control steps.
Compliance with regulatory requirements.
Cybersecurity threats and the effectiveness of risk management processes.
Privacy risks.
Effectiveness of corporate governance guidelines in preventing illegal or improper liability-creating conduct.
Potential for compensation policies and programs to encourage excessive risk-taking.
Challenges in attracting and retaining highly qualified executives in a competitive talent market.
High-volatility markets where three-year forecasts for performance targets may quickly become less meaningful.

Future Outlook

The Human Capital and Compensation Committee (HCCC) intends to continue reviewing compensation and governance practices as the company matures. The company will no longer provide separation benefits for voluntary executive exits, aligning with market best practices, and will provide severance benefits for involuntary exits in accordance with its Executive Severance Plan. The next scheduled say-on-pay vote will occur at the 2027 annual meeting of stockholders. The 2025 Performance Stock Units (PSUs) are subject to a three-year performance period ending December 31, 2027, with final vesting determination in the first quarter of 2028.

Management Comments

Our Board values open and ongoing engagement with our stockholders to better understand their perspectives on a variety of topics, including executive compensation, succession planning, risk oversight and corporate responsibility.
The Board and the HCCC recognize this outcome [44% Say-on-Pay support] as a clear mandate for change and a significant signal of stockholder dissatisfaction.
Our goals were to understand better the priorities and concerns of our stockholders and lay the foundation for sustained, long-term stockholder engagement.
Stockholders understood that fiscal years 2024 and 2025 were years of extraordinary and transformational change at the Company that resulted in the intentional, and almost total, restructuring and streamlining of the Company’s executive team and the exits of a significant number of executives.
We believe these actions demonstrate a high degree of responsiveness to the concerns conveyed to us by the stockholders, while also tailoring our compensation policies and practices to the needs of the Company during a critical transformation period.
Our Board and the HCCC remain committed to maintaining an open, transparent, and proactive dialogue with our stockholders to ensure our executive compensation framework remains unequivocally focused on delivering sustainable, long-term growth and value creation for our stockholders, while prudently managing dilution and SBC expense.
Unity’s approach to executive compensation is grounded in our mission to attract, retain, and motivate a skilled and innovative executive team in a competitive talent market.

Industry Context

StockSavvy.ai notes that Unity operates in a highly dynamic and specialized market environment for creating and growing games and interactive experiences, where exceptional talent is critical. The company's efforts to align executive compensation with performance and reduce dilution reflect a broader industry trend towards increased corporate governance scrutiny and investor activism, especially in the technology sector where stock-based compensation is prevalent. The shift to 50% PSUs for senior executives in 2026 and the adoption of Adjusted EBITDA Less SBC Margin as a performance metric are significant steps to address investor concerns about dilution and profitability, a common theme among high-growth tech companies.

Comparison to Industry Standards

Stock-Based Compensation (SBC) as a percentage of total revenue decreased from 33% in 2024 to 21% in 2025, which is stated to be 'in line with our compensation peer group of companies'.
Executive severance benefits are 'broadly in line with those of our compensation peer group of companies'.
The increase in PSU maximum payout to 200% of target is 'to align with peer practice'.
The change to quarterly vesting for RSU awards for the leadership team 'aligns with market practice'.
The compensation peer group for 2025 included companies such as Alteryx, Elastic N.V., Snap, ANSYS, Electronic Arts, Splunk, AppLovin, MongoDB, Take-Two, Atlassian, Okta, The Trade Desk, Autodesk, Procore, Twilio, UiPath, and Samsara.
The S&P 500 Tech Index is used as a peer comparator for Total Shareholder Return (TSR).

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Class I Director		Bernard Kim	May 1, 2026	Board election to serve as a director and member of the Nominating and Corporate Governance Committee.
Class III Director	Mary Schmidt Campbell		Immediately prior to May 13, 2026	Retirement from the Board.
Class II Director to Class I Director	Shlomo Dovrat	Shlomo Dovrat	March 24, 2026	Resigned as Class II director and immediately reappointed as Class I director to rebalance Board classes; service deemed uninterrupted.
Senior Vice President, Chief Financial Officer		Jarrod Yahes	January 2025	Appointment following an extensive candidate search.
Senior Vice President, Chief Operating Officer	Senior Vice President, Corporate Development (since July 2024)	Alexander Blum	November 2024	Promotion within the company.
Senior Vice President, Chief Legal Officer and Corporate Secretary		Rebecca Boyden	November 2025	Appointment to the role.
Senior Vice President, Chief Legal Officer and Corporate Secretary	Anirma Gupta		November 2025 (ceased serving), May 15, 2026 (employment ends)	Resignation and transition agreement; serving as Strategic Legal Advisor until May 15, 2026.
Executive Officer	Felix Th		March 2025	Ceased to be an executive officer due to organizational restructuring, continues as Senior Vice President, Chief AI Officer and Product and Technology, Grow.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Leadership Structure	The Board is led by James Whitehurst as Chair and Roelof Botha as Lead Independent Director, maintaining flexibility on combining or separating these roles.	Ongoing	Aims to reinforce Board independence and objective oversight of management, increasing accountability and monitoring of actions in stockholders' best interests.
Director Independence	The Board affirmatively determined that a majority of current directors (Mr. Botha, Dr. Campbell, Ms. Daly, Mr. Dovrat, Mr. Durban, Mr. Schuler, Ms. Smith) and incoming director Mr. Kim are independent in accordance with NYSE listing standards.	Annually reviewed	Ensures robust oversight and adherence to regulatory requirements for board composition.
Non-Employee Director Compensation Policy	Approved amendments to modestly increase the value of annual equity grants for each non-employee director by $30,000, and for the Board Chair and Lead Independent Director by $5,000.	February 2026 (for 2026 grants)	Intended to ensure director compensation remains competitive relative to the market.
Executive Compensation Program Design	Increased the performance-based component of annual equity awards for senior executives from 25% PSUs and 75% RSUs to 50% PSUs and 50% RSUs for 2026 annual awards. Introduced Adjusted EBITDA Less Stock-Based Compensation Expense Margin as a performance metric for PSUs. Increased PSU maximum payout to 200% of target. Changed RSU vesting schedule for executive officers from annual to quarterly installments over four years.	February 2026 (for 2026 awards)	Directly addresses stockholder concerns regarding pay-for-performance alignment and dilution, incentivizes strong financial performance, and aligns with competitive peer practices for attracting and retaining executive talent.
Equity Plan Management and Dilution Control	Suspended the 2020 Employee Stock Purchase Plan (ESPP) effective March 2, 2026, and its related automatic annual share reserve increase. Reduced the automatic annual evergreen increase under the 2020 Equity Incentive Plan from 5% to 2.5% of total shares outstanding for 2026. Approved no evergreen increase for the 2021 Share Incentive Plan for 2026.	March 2, 2026 (ESPP), January 1, 2026 (2020 Plan/2021 Plan)	Demonstrates a commitment to judiciously managing long-term stockholder dilution and stock-based compensation expense.
Executive Severance and Transition Practices	Company will no longer provide separation benefits for terminations of executive employment classified as voluntary exits. Severance benefits will be provided in accordance with the Executive Severance Plan for involuntary exits.	Early 2026 (policy change)	Aligns with market best practices and enhances transparency regarding executive departures and associated payments.
Stock Ownership and Holding Guidelines	Directors and executive officers are expected to achieve specified ownership levels within five years and retain a minimum value of stock. All current directors and officers who have served for more than the Initial Period have achieved these guidelines as of December 31, 2025.	Ongoing	Further aligns the interests of directors and executive officers with those of stockholders.
Clawback Policy	Executive Clawback Policy complies with Dodd-Frank and SEC/NYSE requirements, allowing recoupment of incentive compensation in case of financial restatement due to misconduct.	October 2, 2023	Enhances accountability for executive officers and protects company and stockholder interests.
Insider Trading, Anti-Hedging, and Anti-Pledging Policies	Prohibits directors, officers, and employees from engaging in derivative securities or hedging transactions, pledging company stock as collateral for loans, or holding stock in margin accounts.	Ongoing	Promotes compliance with insider trading laws and aligns interests with long-term stock ownership.

Related Party Transactions

In July 2022, Unity entered into an Investment Agreement with entities affiliated with Silver Lake and Sequoia Capital (PIPE Investors), which hold more than 5% of outstanding capital stock and are affiliated with Board members (Egon Durban with Silver Lake, Roelof Botha with Sequoia Capital).
This agreement involved the issuance and sale to the PIPE Investors of $1,000,000,000 in aggregate principal amount of 2.0% Convertible Senior Notes due 2027 (2027 Notes).
The PIPE Transaction closed in November 2022.
As of December 31, 2025, $1,000,000,000 in aggregate principal amount of the 2027 Notes was outstanding.
Unity paid $20,000,000 in interest on these notes in 2025.
Messrs. Durban and Whitehurst are required to remit the proceeds of any sales of such shares to Silver Lake.

Stakeholder Impact

Shareholders: Direct impact through voting on directors and executive compensation. Benefit from increased focus on performance-based compensation, reduced dilution, and improved financial results (revenue growth, EBITDA margin). Potential impact from convertible notes.
Employees: Impacted by the suspension of the 2020 ESPP (though framed as dilution mitigation). Benefit from competitive compensation practices and retention efforts.
Creditors: Impacted by the outstanding $1 billion in convertible senior notes and associated interest payments.

Next Steps

Annual Meeting of Stockholders to be held on May 13, 2026.
Stockholders to vote on the election of Class III directors, ratification of Ernst & Young LLP, and advisory approval of executive compensation.
Final voting results to be published in a current report on Form 8-K after the Annual Meeting.
The HCCC will consider the results of the advisory vote on executive compensation in making future determinations.
The next scheduled say-on-pay vote will be at the 2027 annual meeting of stockholders.
Anirma Gupta's employment with the company ends on May 15, 2026.
Final certification of 2025 PSUs achievement and vesting determination in the first quarter of 2028.
The HCCC will continue reviewing compensation and governance practices as the company matures.

Key Dates

Date	Description
July 2022	Investment Agreement entered into with Silver Lake and Sequoia Capital for Convertible Senior Notes.
November 2022	PIPE Transaction closed upon the closing of the merger with ironSource.
October 2, 2023	Effective date of the Executive Clawback Policy.
January 2025	Jarrod Yahes appointed Senior Vice President, Chief Financial Officer.
March 2025	Felix Th ceased to be an executive officer due to organizational restructuring.
March 2025	Human Capital and Compensation Committee (HCCC) approved the 2025 annual compensation cycle.
September 5, 2025	First tranche of Performance Stock Options (PSOs) for Matthew Bromberg and Alexander Blum vested after the $35 stock price hurdle was met.
November 6, 2025	Anirma Gupta's resignation and transition agreement entered into.
November 14, 2025	Anirma Gupta ceased to be Chief Legal Officer and Corporate Secretary.
November 2025	Rebecca Boyden became Senior Vice President, Chief Legal Officer and Corporate Secretary.
December 31, 2025	End of fiscal year for which financial metrics and compensation are reported; all directors and officers who served for more than the Initial Period achieved stock ownership guidelines.
February 2026	HCCC conducted its annual executive compensation review for fiscal year 2026.
February 4, 2026	Board elected Bernard Kim to serve as a Class I director, effective May 1, 2026.
March 2, 2026	2020 Employee Stock Purchase Plan (ESPP) suspended.
March 16, 2026	Date for beneficial ownership calculation.
March 20, 2026	Record date for the Annual Meeting of Stockholders.
March 24, 2026	Shlomo Dovrat resigned as a Class II director and was immediately reappointed as a Class I director to rebalance Board classes.
March 27, 2026	Proxy materials distributed and made available.
May 1, 2026	Bernard Kim's appointment as Class I director and Nominating and Corporate Governance Committee (NCGC) member becomes effective.
May 12, 2026	Deadline for internet or telephone voting for the Annual Meeting.
May 13, 2026	Annual Meeting of Stockholders (virtual) at 9:00 a.m. Pacific Time; Mary Schmidt Campbell will retire from the Board immediately prior to this meeting.
May 15, 2026	Anirma Gupta's employment with the company ends.
November 27, 2026	Deadline for stockholder proposals to be included in next year's proxy materials (Rule 14a-8).
December 31, 2026	Year-end for which Ernst & Young LLP is appointed independent registered public accounting firm.
January 13, 2027	Start of window for stockholder proposals (including director nominations) not to be included in next year's proxy materials.
February 12, 2027	End of window for stockholder proposals (including director nominations) not to be included in next year's proxy materials.
2027	Next scheduled say-on-pay vote at the annual meeting of stockholders.
December 31, 2027	End of the three-year overall performance period for 2025 PSUs.
First quarter of 2028	Final certification of 2025 PSUs achievement and vesting determination.
2029	Term expiration for Class III directors if elected at the 2026 Annual Meeting.

Recommendation

hold

While Unity demonstrated improved financial performance in 2025, exceeding revenue and EBITDA targets, and has proactively addressed stockholder concerns regarding executive compensation and dilution, the low Say-on-Pay vote in 2025 indicates a need for continued execution and rebuilding of investor confidence. The strategic transformation and leadership changes are ongoing. The company is moving in the right direction with its governance and compensation reforms, but a 'hold' recommendation allows investors to observe the sustained impact of these changes and the company's ability to deliver consistent profitable growth in a competitive market before committing to a stronger position.

Keywords

Unity Software, SEC filing, Proxy Statement, Annual Meeting, Executive Compensation, Corporate Governance, Financial Performance, Revenue, Adjusted EBITDA, Stock-Based Compensation, Equity Awards, Dilution, Board of Directors, Management Changes, Convertible Notes, Gaming, Interactive Media, Software, Technology

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