What changed in this filing

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Item 1. Financial Statements

2021-02-09 compared with 2020-11-06 · 102 added, 88 removed, 498 unchanged (28% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

September 30, 2020 March 31, 2020

December 31, 2020 March 31, 2020

Current assets:

2 unchanged sentences

Restricted cash and cash equivalents 764,419 546,604

Accounts receivable, net of allowances of $ 448 and $ 443 at September 30, 2020 and March 31, 2020, respectively

Accounts receivable, net of allowances of $ 350 and $ 443 at December 31, 2020 and March 31, 2020, respectively

581,136 592,555

28 unchanged sentences

Preferred stock, $ .01 par value, 5,000 shares authorized;

no shares issued and outstanding at September 30, 2020 and March 31, 2020

no shares issued and outstanding at December 31, 2020 and March 31, 2020

Common stock, $ .01 par value, 200,000 shares authorized;

137,349 and 135,927 shares issued and 114,928 and 113,506 outstanding at September 30, 2020 and March 31, 2020, respectively

137,504 and 135,927 shares issued and 115,083 and 113,506 outstanding at December 31, 2020 and March 31, 2020, respectively

Additional paid-in capital 2,327,913 2,134,748

Treasury stock, at cost;

22,421 common shares at September 30, 2020 and March 31, 2020

22,421 common shares at December 31, 2020 and March 31, 2020

( 820,572 ) ( 820,572 )

7 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended September 30, Six Months Ended

September 30,

Three Months Ended December 31, Nine Months Ended

2020 2019 2020 2019

10 unchanged sentences

Interest and other, net 1,098 11,943 12,022 30,422

Loss on long-term investments 655 — 655 —

Gain on long-term investments, net 39,291 — 38,636 —

Income before income taxes 216,446 188,776 424,225 333,805

9 unchanged sentences

Three Months Ended

September 30, Six Months Ended September 30,

December 31, Nine Months Ended December 31,

2020 2019 2020 2019

14 unchanged sentences

(in thousands)

Six Months Ended September 30,

Nine Months Ended December 31,

Operating activities:

5 unchanged sentences

Stock-based compensation 139,835 176,598

Gain on long-term investments ( 40,588 ) —

Other, net ( 89 ) 1,809

13 unchanged sentences

Purchases of fixed assets ( 40,207 ) ( 34,790 )

Proceeds from sale of long-term investment 22,472 —

Purchases of long-term investments ( 16,452 ) ( 26,142 )

13 unchanged sentences

(in thousands)

Three Months Ended September 30, 2020

Three Months Ended December 31, 2020

Common Stock Additional

5 unchanged sentences

Shares Amount Shares Amount

Balance, June 30, 2020 136,689 $ 1,367 $ 2,151,774 ( 22,421 ) $ ( 820,572 ) $ 1,370,590 $ ( 52,131 ) $ 2,651,028

Balance, September 30, 2020 137,349 $ 1,373 $ 2,285,394 ( 22,421 ) $ ( 820,572 ) $ 1,469,911 $ ( 34,824 ) $ 2,901,282

Net income — — — — — 182,248 — 182,248

Change in cumulative foreign currency translation adjustment — — — — — — 30,135 30,135

Change in gains on cash flow hedge, net — — — — — — ( 600 ) ( 600 )

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 295 ) ( 295 )

3 unchanged sentences

Employee share purchase plan settlement 74 1 7,711 — — — — 7,712

Issuance of shares related to Playdots, Inc.

acquisition 604 6 97,641 — — — — 97,647

Balance, September 30, 2020 137,349 $ 1,373 $ 2,285,394 ( 22,421 ) $ ( 820,572 ) $ 1,469,911 $ ( 34,824 ) $ 2,901,282

Three Months Ended September 30, 2019

Balance, December 31, 2020 137,504 $ 1,375 $ 2,327,913 ( 22,421 ) $ ( 820,572 ) $ 1,652,159 $ ( 5,584 ) $ 3,155,291

Three Months Ended December 31, 2019

Common Stock Additional

5 unchanged sentences

Shares Amount Shares Amount

Balance, June 30, 2019 135,527 $ 1,355 $ 2,025,626 ( 22,421 ) $ ( 820,572 ) $ 923,906 $ ( 43,988 ) $ 2,086,327

Balance, September 30, 2019 135,616 $ 1,356 $ 2,059,720 ( 22,421 ) $ ( 820,572 ) $ 995,721 $ ( 54,462 ) $ 2,181,763

Net income — — — — — 163,642 — 163,642

Change in cumulative foreign currency translation adjustment — — — — — — 18,172 18,172

Change in unrealized gains on cash flow hedge, net — — — — — — 2,095 2,095

Change in gains on cash flow hedge, net — — — — — — ( 1,930 ) ( 1,930 )

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 267 ) ( 267 )

3 unchanged sentences

Employee share purchase plan settlement 64 1 5,381 — — — — 5,382

Balance, September 30, 2019 135,616 $ 1,356 $ 2,059,720 ( 22,421 ) $ ( 820,572 ) $ 995,721 $ ( 54,462 ) $ 2,181,763

Six Months Ended September 30, 2020

Balance, December 31, 2019 135,771 $ 1,358 $ 2,100,373 ( 22,421 ) $ ( 820,572 ) $ 1,159,363 $ ( 38,487 ) $ 2,402,035

Nine Months Ended December 31, 2020

Common Stock Additional

8 unchanged sentences

Change in cumulative foreign currency translation adjustment — — — — — — 53,697 53,697

Change in unrealized gains on cash flow hedge, net — — — — — — ( 4,305 ) ( 4,305 )

Change in gains on cash flow hedge, net — — — — — — ( 4,905 ) ( 4,905 )

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — 4,000 4,000

5 unchanged sentences

acquisition 604 6 97,641 — — — — 97,647

Balance, September 30, 2020 137,349 $ 1,373 $ 2,285,394 ( 22,421 ) $ ( 820,572 ) $ 1,469,911 $ ( 34,824 ) $ 2,901,282

Six Months Ended September 30, 2019

Balance, December 31, 2020 137,504 $ 1,375 $ 2,327,913 ( 22,421 ) $ ( 820,572 ) $ 1,652,159 $ ( 5,584 ) $ 3,155,291

Nine Months Ended December 31, 2019

Common Stock Additional

8 unchanged sentences

Change in cumulative foreign currency translation adjustment — — — — — — ( 3,192 ) ( 3,192 )

Change in unrealized gains on cash flow hedge, net — — — — — — 3,371 3,371

Change in gains on cash flow hedge, net — — — — — — 1,441 1,441

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — 453 453

3 unchanged sentences

Employee share purchase plan settlement 126 2 10,513 — — — — 10,515

Balance, September 30, 2019 135,616 $ 1,356 $ 2,059,720 ( 22,421 ) $ ( 820,572 ) $ 995,721 $ ( 54,462 ) $ 2,181,763

Balance, December 31, 2019 135,771 $ 1,358 $ 2,100,373 ( 22,421 ) $ ( 820,572 ) $ 1,159,363 $ ( 38,487 ) $ 2,402,035

See accompanying Notes.

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ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning December 15, 2020 (April 1, 2021 for the Company), with early adoption permitted.

We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements.

We are currently evaluating the potential impact of adopting this guidance, and we do not expect that the impact of adopting this guidance will be material to our Consolidated Financial Statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of revenue

Product revenue

Product revenue is primarily comprised of the portion of revenue from software products that is recognized when the customer takes control of the product (i.e., upon delivery of the software product).

Service and other revenue

Service and other revenue is primarily comprised of revenue from game related services, virtual currency transactions, and in-game purchases which are recognized over an estimated service period.

Product revenue

Net revenue by product revenue and service and other was as follows:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

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Total net revenue $ 860,889 $ 930,129 $ 2,533,341 $ 2,328,429

Full game and other revenue

Full game and other revenue primarily includes the initial sale of full game software products, which may include offline and/or significant game related services.

Recurrent consumer spending revenue

Recurrent consumer spending revenue is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, and in-game purchases.

Full game and other revenue

Full game and other revenue primarily includes the initial sale of full game software products, which may include offline and/or significant game related services.

Net revenue by full game and other revenue and recurrent consumer spending was as follows:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

5 unchanged sentences

Net revenue by geographic region was as follows:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

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Net revenue by platform was as follows:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

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Net revenue by distribution channel was as follows:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

5 unchanged sentences

We record deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations.

Deferred revenue, including current and non-current balances as of September 30, 2020 and March 31, 2020 were $ 1,095,944 and $ 806,123 , respectively.

For the three months ended September 30, 2020, the additions to our deferred revenue balance were due primarily to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were due primarily to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the three months ended September 30, 2020 and 2019, $ 241,732 and $ 234,411 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

During the six months ended September 30, 2020 and 2019, $ 612,946 and $ 564,833 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of September 30, 2020, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,223,304 , which includes our deferred revenue balances and amounts to be invoiced and recognized in future periods.

Deferred revenue, including current and non-current balances as of December 31, 2020 and March 31, 2020 were $ 1,023,289 and $ 806,123 , respectively.

For the three months ended December 31, 2020, the additions to our deferred revenue balance were due primarily to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were due primarily to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the three months ended December 31, 2020 and 2019, $ 109,713 and $ 193,468 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

During the nine months ended December 31, 2020 and 2019, $ 722,658 and $ 758,301 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of December 31, 2020, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,134,398 , which includes our deferred revenue balances and amounts to be invoiced and recognized in future periods.

We expect to recognize approximately $ 1,011,585 of this balance as revenue over the next 12 months, and the remainder thereafter.

This balance does not include an estimate for variable consideration arising from sales-based royalty license revenue in excess of the contractual minimum guarantee.

As of September 30, 2020 and March 31, 2020, our contract asset balances were $ 98,053 and $ 81,625 , respectively, which are recorded within Prepaid expenses and other in our Condensed Consolidated Balance Sheets.

As of December 31, 2020 and March 31, 2020, our contract asset balances were $ 105,460 and $ 81,625 , respectively, which are recorded within Prepaid expenses and other in our Condensed Consolidated Balance Sheets.

MANAGEMENT AGREEMENT

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The 2017 Management Agreement provides for an annual management fee of $ 3,100 over the term of the agreement and a maximum annual bonus opportunity of $ 7,440 over the term of the agreement, based on the Company achieving certain performance thresholds.

In consideration for ZelnickMedia's services, we recorded consulting expense (a component of General and administrative expenses) of $ 2,605 and $ 1,705 during the three months ended September 30, 2020 and 2019, respectively, and $ 5,270 and $ 3,375 during the six months ended September 30, 2020 and 2019, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZelnickMedia, which is included in General and administrative expenses, of $ 6,887 and $ 5,956 during the three months ended September 30, 2020 and 2019, respectively, and $ 13,657 and $ 11,501 during the six months ended September 30, 2020 and 2019, respectively.

In consideration for ZelnickMedia's services, we recorded consulting expense (a component of General and administrative expenses) of $ 2,655 and $ 3,166 during the three months ended December 31, 2020 and 2019, respectively, and $ 7,925 and $ 6,541 during the nine months ended December 31, 2020 and 2019, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZelnickMedia, which is included in General and administrative expenses, of $ 6,887 and $ 5,956 during the three months ended December 31, 2020 and 2019, respectively, and $ 20,544 and $ 17,457 during the nine months ended December 31, 2020 and 2019, respectively.

In connection with the 2017 Management Agreement, we have granted restricted stock units as follows:

Six Months Ended September 30,

Nine Months Ended December 31,

Time-based 79 92

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At the end of each reporting period, we assess the probability of each performance metric and upon determination that certain thresholds are probable, we record expense for the unvested portion of the shares of performance-based restricted stock units.

The unvested portion of time-based, market-based and performance-based restricted stock units held by ZelnickMedia were 588 and 613 as of September 30, 2020 and March 31, 2020, respectively.

During the three and six months ended September 30, 2020, 297 restricted stock units previously granted to ZelnickMedia vested, and no restricted stock units were forfeited by ZelnickMedia.

The unvested portion of time-based, market-based and performance-based restricted stock units held by ZelnickMedia were 588 and 613 as of December 31, 2020 and March 31, 2020, respectively.

During the three and nine months ended December 31, 2020, 297 restricted stock units previously granted to ZelnickMedia vested, and no restricted stock units were forfeited by ZelnickMedia.

FAIR VALUE MEASUREMENTS

Recurring fair value measurements

The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, prepaid expenses and other, accounts payable, and accrued expenses and other current liabilities, approximate fair value because of their short maturities.

6 unchanged sentences

The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which is measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

September 30, 2020 Quoted prices

December 31, 2020 Quoted prices

(level 1) Significant

21 unchanged sentences

Corporate bonds 9,888 — 9,888 — Cash and cash equivalents

Money market funds 546,604 546,604 — — Restricted cash and cash equialents

Money market funds 546,604 546,604 — — Restricted cash and cash equivalents

Corporate bonds 334,631 — 334,631 — Short-term investments

7 unchanged sentences

Total recurring fair value measurements, net $ 2,212,804 $ 1,669,165 $ 540,880 $ 2,759

We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the six months ended September 30, 2020.

We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the nine months ended December 31, 2020.

Nonrecurring fair value measurements

We hold equity investments in certain unconsolidated entities without a readily determinable fair value.

These strategic investments represent less than a 20% ownership interest in each of the privately-held affiliates, and we do not maintain power over or control of the entities.

We have elected the practical expedient in Topic 321, Investments-Equity Securities , to measure these investments at cost less any impairment, adjusted for observable price changes, if any.

Based on these considerations, we estimate that the carrying value of the acquired shares represents the fair value of the investment.

At December 31, 2020, we held $ 45,000 of such investments in Other assets within our Condensed Consolidated Balance Sheet.

During the three and nine months ended December 31, 2020, we recognized a gain on the sale of a portion of one of these investments of $ 19,791 and an unrealized gain based on our sale constituting an observable price change of $ 20,797 related to the same investment.

Both gains are reflected in Gain on long-term investments, net within our Condensed Consolidated Statements of Operations.

SHORT-TERM INVESTMENTS

Our Short-term investments consisted of the following:

September 30, 2020

December 31, 2020

Amortized Cost Gains Losses Fair Value

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Total Short-term investments $ 646,786 $ 645 $ ( 3,428 ) $ 644,003

The following table summarizes the contracted maturities of our short-term investments at September 30, 2020:

September 30, 2020

The following table summarizes the contracted maturities of our short-term investments at December 31, 2020:

December 31, 2020

Short-term investments

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The following table shows the gross notional amounts of foreign currency forward contracts:

September 30, 2020 March 31, 2020

December 31, 2020 March 31, 2020

Forward contracts to sell foreign currencies $ 114,105 $ 122,024

Forward contracts to purchase foreign currencies 81,050 52,596

For the three months ended September 30, 2020 and 2019, we recorded a loss of $ 1,029 and a gain of $ 2,210 , respectively, and for the six months ended September 30, 2020 and 2019 we recorded a loss of $ 3,685 and a loss of $ 1,087 , respectively, related to foreign currency forward contracts in Interest and other, net in our Condensed Consolidated Statements of Operations.

For the three months ended December 31, 2020 and 2019, we recorded a loss of $ 5,832 and a loss of $ 556 , respectively, and for the nine months ended December 31, 2020 and 2019 we recorded a loss of $ 9,518 and a loss of $ 1,643 , respectively, related to foreign currency forward contracts in Interest and other, net in our Condensed Consolidated Statements of Operations.

Our foreign currency exchange forward contracts are not designated as hedging instruments under hedge accounting and are used to reduce the impact of foreign currency on certain balance sheet exposures and certain revenue and expense.

6 unchanged sentences

Inventory balances by category were as follows:

September 30, 2020 March 31, 2020

December 31, 2020 March 31, 2020

Finished products $ 21,848 $ 17,984

1 unchanged sentence

Inventory $ 26,733 $ 19,108

Estimated product returns included in inventory at September 30, 2020 and March 31, 2020 were $ 425 and $ 506 , respectively.

Estimated product returns included in inventory at December 31, 2020 and March 31, 2020 were $ 367 and $ 506 , respectively.

SOFTWARE DEVELOPMENT COSTS AND LICENSES

Details of our capitalized software development costs and licenses were as follows:

September 30, 2020 March 31, 2020

December 31, 2020 March 31, 2020

Current Non-current Current Non-current

3 unchanged sentences

Software development costs and licenses $ 48,784 $ 436,702 $ 40,316 $ 401,778

During the three months ended September 30, 2020 and 2019, we did no t record any software development impairment charges (a component of Cost of goods sold).

During the six months ended September 30, 2020 and 2019, we recorded $ 19,695 and $ 0 , respectively, of software development impairment charges (a component of Cost of goods sold).

The impairment charge recorded during the six months ended September 30, 2020 related to unamortized capitalized costs for the development of a title, which were anticipated to exceed the net realizable value of the asset at the time they were impaired.

During the three months ended December 31, 2020 and 2019, we recorded $ 5,532 and $ 0 , respectively, of software development impairment charges (a component of Cost of goods sold).

During the nine months ended December 31, 2020 and 2019, we recorded $ 25,227 and $ 0 , respectively, of software development impairment charges (a component of Cost of goods sold).

The impairment charge recorded during the three months ended December 31, 2020 related to a decision not to proceed with further development of certain interactive entertainment software.

The additional impairment charge recorded during the nine months ended December 31, 2020 related to unamortized capitalized costs for the development of a title, which were anticipated to exceed the net realizable value of the asset at the time they were impaired.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

September 30, 2020 March 31, 2020

December 31, 2020 March 31, 2020

Software development royalties $ 680,428 $ 822,416

Licenses 133,563 57,651

Compensation and benefits 170,780 81,791

Licenses 118,664 57,651

Refund liability 72,795 77,829

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In addition, the Credit Agreement contains uncommitted incremental capacity permitting the incurrence of up to an additional $ 250,000 in term loans or revolving credit facilities.

Loans under the Credit Agreement will bear interest at a rate of (a) 0.250 % to 0.750 % above a certain base rate ( 3.25 % at September 30, 2020) or (b) 1.125 % to 1.750 % above LIBOR (approximately 1.48 % at September 30, 2020), which rates are determined by reference to our consolidated total net leverage ratio.

We had no outstanding borrowings at September 30, 2020.

Loans under the Credit Agreement will bear interest at a rate of (a) 0.250 % to 0.750 % above a certain base rate ( 3.25 % at December 31, 2020) or (b) 1.125 % to 1.750 % above LIBOR (approximately 1.44 % at December 31, 2020), which rates are determined by reference to our consolidated total net leverage ratio.

We had no outstanding borrowings at December 31, 2020.

Information related to availability on our Credit Agreement was as follows:

September 30, 2020 March 31, 2020

December 31, 2020 March 31, 2020

Available borrowings $ 197,874 $ 198,336

Outstanding letters of credit 2,126 1,664

We recorded interest expense and fees related to the Credit Agreement of $ 82 and $ 84 for the three months ended September 30, 2020 and 2019, respectively, and $ 164 and $ 166 for the six months ended September 30, 2020 and 2019, respectively.

We recorded interest expense and fees related to the Credit Agreement of $ 141 and $ 82 for the three months ended December 31, 2020 and 2019, respectively, and $ 305 and $ 248 for the nine months ended December 31, 2020 and 2019, respectively.

The Credit Agreement also includes, among other terms and conditions, maximum leverage ratio, minimum cash reserves and, in certain circumstances, minimum interest coverage ratio financial covenants, as well as limitations on us and each of our subsidiaries’ ability to:

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The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

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Diluted earnings per share $ 1.57 $ 1.43 $ 3.20 $ 2.47

During the six months ended September 30, 2020, 1,112 restricted stock awards vested, we granted 729 unvested restricted stock awards, and 18 unvested restricted stock awards were forfeited.

During the nine months ended December 31, 2020, 1,235 restricted stock awards vested, we granted 872 unvested restricted stock awards, and 29 unvested restricted stock awards were forfeited.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides the components of accumulated other comprehensive loss:

Six Months Ended September 30, 2020

Nine Months Ended December 31, 2020

adjustments Unrealized

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Amounts reclassified from accumulated other comprehensive loss — ( 600 ) ( 1,333 ) — ( 1,933 )

Balance at September 30, 2020 $ ( 36,973 ) $ 600 $ — $ 1,549 $ ( 34,824 )

Six Months Ended September 30, 2019

Balance at December 31, 2020 $ ( 6,838 ) $ — $ — $ 1,254 $ ( 5,584 )

Nine Months Ended December 31, 2019

adjustments Unrealized

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Amounts reclassified from accumulated other comprehensive loss — — ( 1,157 ) — ( 1,157 )

Balance at September 30, 2019 $ ( 54,454 ) $ 600 $ ( 1,914 ) $ 1,306 $ ( 54,462 )

Balance at December 31, 2019 $ ( 36,282 ) $ 600 $ ( 3,844 ) $ 1,039 $ ( 38,487 )

COMMITMENTS AND CONTINGENCIES

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Other than agreements entered into in the ordinary course of business and in addition to the agreements requiring known cash commitments as reported in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, we did not have any significant changes to our commitments since March 31, 2020.

Included in our Restricted cash as of December 31, 2020, was the cash portion of our offer to acquire Codemasters Group Holdings PLC, a UK-based game publisher and developer.

As of January 13, 2021, the offer lapsed, and the cash was no longer restricted.

Legal and Other Proceedings

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In the first quarter of fiscal year 2018, we announced and initiated actions to implement a strategic reorganization at one of our labels (the "2018 Plan").

In connection with this initiative, we recorded expense of $ 239 and $ 327 for business reorganization during the three months ended September 30, 2020 and 2019, respectively, and $ 239 and $ 713 during the six months ended September 30, 2020 and 2019, respectively, due to updating estimates for employee separation costs.

During the six months ended September 30, 2020, we made payments of $ 3,500 related to these reorganization activities.

As of September 30, 2020, $ 3,096 remained accrued in Accrued expenses and other current liabilities.

In connection with this initiative, we recorded a benefit of $ 377 and $ 246 for business reorganization during the three months ended December 31, 2020 and 2019, respectively, and a benefit of $ 138 and expense of $ 467 during the nine months ended December 31, 2020 and 2019, respectively, due to updating estimates for employee separation costs.

During the nine months ended December 31, 2020, we made payments of $ 3,500 related to these reorganization activities.

As of December 31, 2020, $ 1,166 remained accrued in Accrued expenses and other current liabilities and $ 1,550 in Other non-current liabilities.

Although we may record additional expense or benefit in future periods to true-up estimates, we do not expect to incur additional reorganization costs in connection with the 2018 Plan.

The provision for income taxes for the three months ended September 30, 2020 is based on our projected annual effective tax rate for fiscal year 2021, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 18,097 for the three months ended September 30, 2020 as compared to $ 11,059 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 15.4 % for the three months ended September 30, 2020 was due primarily to a tax benefit of $ 5,730 due to tax credits, excess tax benefits of $ 2,321 from employee stock-based compensation, and the geographic mix of earnings.

The provision for income taxes for the six months ended September 30, 2020 is based on our projected annual effective tax rate for fiscal year 2021, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 19,953 for the six months ended September 30, 2020 as compared to $ 26,934 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 9.6 % for the six months ended September 30, 2020 was due primarily to a tax benefit of $ 10,662 due to tax credits and excess tax benefits of $ 10,188 from employee stock-based compensation.

The provision for income taxes for the three months ended December 31, 2020 is based on our projected annual effective tax rate for fiscal year 2021, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 34,198 for the three months ended December 31, 2020 as compared to $ 25,134 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 15.8 % for the three months ended December 31, 2020 was due primarily to a tax benefit of $ 7,116 due to tax credits, excess tax benefits of $ 3,392 from employee stock-based compensation and the geographic mix of earnings.

The provision for income taxes for the nine months ended December 31, 2020 is based on our projected annual effective tax rate for fiscal year 2021, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 54,151 for the nine months ended December 31, 2020 as compared to $ 52,068 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 12.8 % for the nine months ended December 31, 2020 was due primarily to a tax benefit of $ 17,778 due to tax credits and excess tax benefits of $ 13,580 from employee stock-based compensation and geographic mix of earnings.

We are regularly examined by domestic and foreign taxing authorities.

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The cash portion was funded from our cash on hand.

Of the cash consideration, $ 13,440 was contractually deferred and accrued for within Accrued expenses and other current liabilities within our Condensed Consolidated Balance Sheet.

Of the cash consideration, $ 13,440 was contractually deferred and accrued for within Accrued expenses and other current liabilities within our Condensed Consolidated Balance Sheet at acquisition.

During the three months ended December 31, 2020, we paid out $ 3,840 .

As of December 31, 2020, $ 9,600 remained accrued within Accrued expenses and other current liabilities within our Condensed Consolidated Balance Sheet at acquisition.

We acquired Playdots as part of our ongoing strategy to expand selectively our portfolio of owned intellectual property and to diversify and strengthen further our mobile offerings.

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income tax purposes, is primarily attributable to the assembled workforce of the acquired business and expected synergies at the time of the acquisition.

The amounts of revenue and earnings of Playdots included in our Consolidated Statement of Operations from the acquisition date to the period ending September 30, 2020 are as follows:

September 4, 2020 to September 30, 2020

The amounts of revenue and earnings of Playdots included in our Consolidated Statement of Operations from the acquisition date to the period ending December 31, 2020 are as follows:

Three Months Ended December 31, 2020 Nine Months Ended December 31, 2020

Net revenue 7,269 8,503

Net income (loss) ( 12,368 ) ( 18,417 )

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the three and six months ended September 30, 2020 and 2019, as though the acquisition had occurred on April 1, 2019, the beginning of Fiscal 2020, and Playdots had been included in our consolidated results for the entire periods subsequent to that date.

Three Months Ended September 30, Six Months Ended September 30,

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the three and nine months ended December 31, 2020 and 2019, as though the acquisition had occurred on April 1, 2019, the beginning of Fiscal 2020, and Playdots had been included in our consolidated results for the entire periods subsequent to that date.

Three Months Ended December 31, Nine Months Ended December 31,

2020 2019 2020 2019

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The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and Playdots and not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of Fiscal 2020 and are not indicative of the future operating results of the combined company.

The financial information for Playdots prior to the acquisition has been included in the pro-forma results of operations and includes certain adjustments to the historical consolidated financial statements of Playdots to align with the Company's accounting policies.

The pro-forma consolidated results of operations also include the business combination accounting effects resulting from the acquisition, including amortization expense related to finite-lived intangible assets acquired and the related tax effects assuming that the business combination occurred on April 1, 2019.

Transaction costs of $ 2,512 for the three and six months ended September 30, 2020, which have been recorded within General and administrative expense in our Condensed Consolidated Statements of Operations, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature.

Transaction costs of $ 41 and $ 2,553 for the three and nine months ended December 31, 2020, respectively, which have been recorded within General and administrative expense in our Condensed Consolidated Statements of Operations, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements