Unity Software grants performance-based stock to executives

Unity Software Inc . (NYSE:U), a technology company with a market capitalization of $8.78 billion, has announced the approval of equity awards for its executive officers, aiming to incentivize performance aligned with the company’s financial targets. While the company reported negative EBITDA of $132 million in the last twelve months, InvestingPro analysis indicates analysts expect profitability in 2025. The announcement was made following a decision by the Human Capital and Compensation Committee of the board on March 4, 2025.

The equity awards consist of performance-based restricted stock units (PSUs) granted to each executive officer as part of the company’s compensation strategy. These PSUs are intended to motivate the executives to achieve challenging yet attainable goals pertaining to Unity Software (ETR:SOWGn)’s revenue and adjusted EBITDA minus Stock-based Compensation Expense, with the broader objective of enhancing long-term performance and increasing shareholder value. According to InvestingPro data, Unity maintains a healthy gross profit margin of 74.32% and strong liquidity with a current ratio of 2.5, suggesting solid operational efficiency despite current profitability challenges.

Executives Matthew Bromberg, Jarrod Yahes, Alex Blum, and Anirma Gupta were awarded PSUs in target amounts of 106,609, 43,421, 75,000, and 50,000, respectively. The PSUs are subject to a three-year performance period, starting January 1, 2025, and ending December 31, 2027. This period is broken down into three one-year segments, with each segment representing one-third of the total PSUs granted.

The company’s performance goals, which will determine the vesting of these PSUs, are tied to its revenue and adjusted EBITDA less stock-based compensation expense margin. Seventy-five percent of the PSUs are contingent upon achieving revenue targets, while the remaining twenty-five percent are tied to the adjusted EBITDA margin goals. Unity’s stock has shown strong momentum, gaining over 44% in the past six months, and InvestingPro analysis suggests the stock is currently undervalued. For deeper insights into Unity’s valuation and growth potential, investors can access comprehensive Pro Research Reports covering 1,400+ top stocks, available exclusively on InvestingPro. The level of attainment for each goal can range from 0% to 150%, known as the Performance Attainment Factor.

The actual number of PSUs that will vest for each executive will be calculated based on the average Performance Attainment Factor over the three-year period, multiplied by the target number of PSUs. However, the vesting amount will not exceed 150% of the target PSUs granted. Vesting is also dependent on the executive’s continued employment through the end of the performance period. There are provisions for accelerated vesting in the event of a Qualified Termination Event related to a change in control of the company or the executive’s death, with the amount based on either actual performance or target performance, as applicable.

This summary is based on the details provided in Unity Software’s SEC filing, which outlines the terms of the PSU awards. The full terms are documented in the Form of Grant Notice and Award Agreement for PSUs, which was attached to the filing as Exhibit 10.1.

In other recent news, Unity Software has announced plans to offer $500 million in convertible senior notes due in 2030, with an option for an additional $75 million. This move is intended to finance the repurchase of its 0% Convertible Senior Notes due in 2026 and to fund general corporate purposes. The company is also engaging in capped call transactions to minimize potential dilution from the conversion of these new notes. Meanwhile, UBS has raised its price target for Unity Software to $30, maintaining a Neutral rating, citing cautious optimism about the company’s AI/ML strategies and the adoption of Unity 6. Needham has also increased its target to $33, retaining a Buy rating, as they anticipate a turnaround in Unity’s Grow business with the launch of a new product named Vector. Stifel analysts have further raised their target to $35, following Unity’s fourth-quarter earnings and first-quarter guidance, and they remain confident about the company’s growth trajectory. These developments reflect the market’s close attention to Unity Software’s financial strategies and product innovations.

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