United States securities and exchange commission logo
June 16, 2020
John Riccitiello
Chief Executive Officer
Unity Software Inc.
30 3rd Street
San Francisco, CA 94103
Re: Unity Software Inc.
Draft Registration
Statement on Form S-1
Submitted May 20,
2020
CIK No. 0001810806
Dear Mr. Riccitiello:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Risk Factors Summary, page 9
1. Please disclose the
percentage that will be owned by your executive officers, directors and
principal stockholders.
Further, discuss the risk that your executive officers, directors and
principal stockholders,
if they choose to act together, will continue to have the ability to
control or
significantly influence all matters submitted to stockholders for approval.
John Riccitiello
FirstName LastNameJohn Riccitiello
Unity Software Inc.
Comapany NameUnity Software Inc.
June 16, 2020
Page 2
June 16, 2020 Page 2
FirstName LastName
Risk Factors
Our amended and restated certificate of incorporation will designate the Court
of Chancery...,
page 60
2. You state that your amended and restated certificate of incorporation
provides that the
federal district courts of the United States of America will be the
exclusive forum for
resolving any complaint asserting a cause of action arising under the
Securities Act.
Section 22 of the Securities Act creates concurrent jurisdiction for
federal and state courts
over all suits brought to enforce any duty or liability created by the
Securities Act or the
rules and regulations thereunder. Please revise to state that there is
uncertainty as to
whether a court would enforce such provision.
Market, Industry and Other Data
User Metrics, page 63
3. Please revise to clarify whether your 1.5 million monthly active
creators and over two
billion monthly active end-users include both paying and non-paying
customers and end-
users. Explain whether you consider monthly active creators and
monthly active end-
users to be key business metrics that you use to manage the business.
Tell us your
consideration of providing comparative information for each period
presented. We refer
you to Section III.B of SEC Release 33-8350.
Selected Consolidated Financial and Other Data
Key Metrics, page 73
4. We note that you track your performance by measuring your dollar-based
net expansion
rate, which compares your Create and Operate Solutions revenue from
the same set of
customers across comparable periods, calculated on a trailing 12-month
basis. Please tell
us your consideration of disclosing the dollar-based net expansion
rate separately for your
Create and Operate Solutions or separately discussing the effects of
monetization on this
rate.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 76
5. Please discuss whether the growth in new customers in 2019 was
primarily attributable to
Create Solutions or Operate Solutions and whether this has been
consistent with historical
trends.
Results of Operations, page 89
6. Please revise your disclosures to provide a quantitative and
qualitative analysis of how
your Operate Solutions revenues are impacted each period by the total
number of
advertising impressions or installations and the average cost per
impression or
installation. This appears to be important and material information
necessary to
John Riccitiello
FirstName LastNameJohn Riccitiello
Unity Software Inc.
Comapany NameUnity Software Inc.
June 16, 2020
Page 3
June 16, 2020 Page 3
FirstName LastName
understanding your business and results of operations. We refer you to
Item 303(a)(3)(iii)
of Regulation S-K and Sections III.D of Sec Release 33-6835.
7. We note from your disclosures that the majority of your Operate
Solutions monetization
revenue is currently generated from advertising under a revenue-share
model, and the
remainder of your Operate Solutions revenue is generated from
cloud-based solutions as
well as enterprise hosting ("Hosting Services") primarily under a
usage-based model and
to a lesser extent a fixed fee model. Since you indicate that
advertising revenues and
Hosing Services are the two primary ways in which you generate revenue
under your
Operate Solutions, it appears that those components should be
described by their
respective revenue contribution in order to understand your operating
results and related
trends. We refer you to 303(a)(3) of Regulation S-K and Section III.D
of SEC
Interpretive Release 33-6835.
Liquidity and Capital Resources, page 93
8. Please clarify your disclosures that indicate since inception, you
have financed your
operations primarily through cash flow from operations. In this
respect, we note that since
your inception, you have generated losses from your operations as
reflected in your
accumulated deficit of $515.2 million as of December 31, 2019 and
negative cash flows
from operating activities.
9. Please revise your disclosures to focus on the primary drivers of and
other material factors
necessary to an understanding of your underlying cash flows and the
indicative value of
historical cash flows. As an example, please revise to disclose your
day's sales
outstanding at each balance sheet date and the impact it has on your
cash flows. Address
the payment terms typically stipulated in both your Create Solution
and Operate Solution
contacts. Discuss the underlying reasons for instances of slow payment
and receivables
that remain outstanding for lengthy periods. In addition, revise to
describe the payment
terms associated with your publisher payable and the impact it has on
your cash flows.
We refer you to Section IV.B of SEC Release No. 33-8350.
Critical Accounting Policies and Estimates, page 96
10. Please tell us your consideration of including critical accounting
policies to discuss the
estimates and assumptions associated with goodwill and intangible
assets. We refer you
to Section V of SEC Release No. 33-8350.
Business, page 101
11. We note your disclosure on page 23 that you are reliant on your
third-party service
providers for critical services to deliver your products. Please
revise to provide a
discussion of the material the terms of your agreements with your
third party service
providers.
John Riccitiello
FirstName LastNameJohn Riccitiello
Unity Software Inc.
Comapany NameUnity Software Inc.
June 16, 2020
Page 4
June 16, 2020 Page 4
FirstName LastName
Consolidated Financial Statements
Consolidated Statement of Operations and Comprehensive Loss, page F-4
12. We note that you present gross profit on the face of your consolidated
statements of
operations. However, it is not clear whether you include depreciation
and amortization in
cost of revenue. Please revise your disclosures to indicate the line
items to which you have
allocated depreciation and amortization expense. Confirm that your
presentation
complies with the guidance in Codification of Staff Accounting
Bulletins (SAB) Topic
11B.
Notes to the Consolidated Financial Statement
Note 1. Description of Business and Summary of Significant Accounting Policies,
page F-7
13. Please revise your disclosures to clarify the nature and terms of your
publisher payable.
Explain how the expenses associated with your publisher payable are
presented in your
consolidated statements of operations. Consider adding disclosure to
the Liquidity and
Capital Resources section of the filing to address whether you have
the ability to extend
payment. If so, indicate the importance in your ability to manage your
liquidity needs and
describe any uncertainty in this practice.
Revenue Recognition, page F-7
14. We note from your disclosures on page 114 that your monetization
products generate
revenue for your customers by providing micro-transaction capabilities
that enable
revenue through in-app purchases, or IAP. Please revise to clarify
whether you retain a
share of the revenue generated through IAP.
15. You disclose that when Strategic Partnerships contain non-monetary
consideration, you
measure and record the transaction price at the estimated fair value
of the non-cash
consideration received from the customer. Please explain the nature of
the non-monetary
consideration in your Strategic Partnerships. Tell us how you
determine the estimated fair
value of the non-cash consideration received from the customer.
Note 4. Acquisitions, page F-19
16. Please revise your disclosures to include a qualitative description of
the factors that make
up the goodwill recognized for the Vivox, deltaDNA and Artomatix
acquisitions. We
refer you to ASC 805-30-50-1.
General
17. We note your disclosure that you commissioned a report by a third
party strategy
consulting firm, Altman Vilandrie & Company, in 2020. Please file a
consent by Altman
Vilandrie & Company as an exhibit to your registration statement
pursuant to Rule 436 of
the Securities Act.
John Riccitiello
Unity Software Inc.
June 16, 2020
Page 5
18. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Morgan Youngwood, Staff Accountant, at (202) 551-3479 or
Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Matthew Derby, Staff
Attorney, at (202) 551-3334 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
FirstName LastNameJohn Riccitiello
Division of
Corporation Finance
Comapany NameUnity Software Inc.
Office of
Technology
June 16, 2020 Page 5
cc: Jonie Ing Kondracki
FirstName LastName