What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-03 · 155 added, 97 removed, 440 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

June 30, 2021 March 31, 2021

September 30, 2021 March 31, 2021

Current assets:

2 unchanged sentences

Restricted cash and cash equivalents 754,368 538,822

Accounts receivable, net of allowances of $ 350 and $ 350 at June 30, 2021 and March 31, 2021, respectively

Accounts receivable, net of allowances of $ 350 and $ 350 at September 30, 2021 and March 31, 2021, respectively

804,468 552,762

13 unchanged sentences

Total assets $ 6,619,031 $ 6,028,218

LIABILITIES AND EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

10 unchanged sentences

Commitments and contingencies (See Note 13 )

Take-Two Interactive Software, Inc.

Stockholders' equity:

Preferred stock, $ 0.01 par value, 5,000 shares authorized;

no shares issued and outstanding at June 30, 2021 and March 31, 2021

no shares issued and outstanding at September 30, 2021 and March 31, 2021

Common stock, $ 0.01 par value, 200,000 shares authorized;

138,846 and 137,584 shares issued and 116,425 and 115,163 outstanding at June 30, 2021 and March 31, 2021, respectively

138,891 and 137,584 shares issued and 115,210 and 115,163 outstanding at September 30, 2021 and March 31, 2021, respectively

Additional paid-in capital 2,475,085 2,288,781

Treasury stock, at cost;

22,421 common shares at June 30, 2021 and March 31, 2021

23,681 and 22,421 common shares at September 30, 2021 and March 31, 2021, respectively

( 1,020,584 ) ( 820,572 )

1 unchanged sentence

Accumulated other comprehensive loss ( 19,747 ) ( 8,664 )

Total Take-Two Interactive Software, Inc.

stockholders' equity 3,618,932 3,331,892

Non-controlling interest (See Note 15 )

Total equity $ 3,631,307 $ 3,331,892

Total liabilities and equity $ 6,314,255 $ 6,028,218

Total stockholders' equity $ 3,469,668 $ 3,331,892

Total liabilities and stockholders' equity $ 6,619,031 $ 6,028,218

See accompanying Notes.

2 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended June 30,

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

2021 2020 2021 2020

Net revenue $ 858,198 $ 841,142 $ 1,671,544 $ 1,672,452

1 unchanged sentence

Gross profit 401,516 408,637 885,147 763,258

General and administrative 104,447 102,173

Selling and marketing 136,019 113,691 239,873 198,470

General and administrative 127,331 91,433 231,778 193,606

Research and development 101,508 74,216 193,802 147,324

4 unchanged sentences

Interest and other, net ( 572 ) 2,706 ( 1,599 ) 10,924

Gain on long-term investments, net 1,997 —

Gain (loss) on long-term investments, net 395 ( 655 ) 2,392 ( 655 )

Income before income taxes 19,974 117,418 191,418 207,779

6 unchanged sentences

TAKE-TWO INTERACTIVE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(in thousands)

Three Months Ended

September 30, Six Months Ended September 30,

2021 2020 2021 2020

Net income $ 10,297 $ 99,321 $ 162,553 $ 187,826

7 unchanged sentences

Change in fair value of available for sale securities ( 246 ) ( 1,554 ) ( 484 ) 4,295

Other comprehensive income 5,894 6,245

Comprehensive income $ 158,150 $ 94,750

Other comprehensive (loss) income ( 16,977 ) 17,307 ( 11,083 ) 23,552

Comprehensive (loss) income $ ( 6,680 ) $ 116,628 $ 151,470 $ 211,378

See accompanying Notes.

2 unchanged sentences

(in thousands)

Three Months Ended June 30,

Six Months Ended September 30,

Operating activities:

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization and impairment of software development costs and licenses 24,511 57,441

Amortization of software development costs and licenses 95,339 72,969

Impairment of software development costs and licenses 65,049 19,695

Depreciation 28,436 25,826

Amortization and impairment of intellectual property 15,215 4,986

Amortization of intellectual property 33,668 11,801

Stock-based compensation 96,196 98,719

20 unchanged sentences

Issuance of common stock 9,230 6,503

Loan repayment ( 234 ) —

Repurchase of common stock ( 200,012 ) —

Net cash used in financing activities ( 244,386 ) ( 41,699 )

2 unchanged sentences

Cash, cash equivalents, and restricted cash and cash equivalents, beginning of year (1)

2,060,247 1,993,392

Cash, cash equivalents, and restricted cash and cash equivalents, end of period (1)

$ 1,714,706 $ 2,084,780

(1) Cash, cash equivalents and restricted cash and cash equivalents shown on our Condensed Consolidated Statements of Cash Flow includes amounts in the Cash and cash equivalents, Restricted cash and cash equivalents, and Long-term restricted cash and cash equivalents on our Condensed Consolidated Balance Sheet.

3 unchanged sentences

(in thousands)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Take-Two Interactive Software, Inc.

5 unchanged sentences

Shares Amount Shares Amount

Balance, June 30, 2021 138,846 $ 1,389 $ 2,417,658 ( 22,421 ) $ ( 820,572 ) $ 2,023,227 $ ( 2,770 ) $ 12,375 $ 3,631,307

Net income — — — — — 10,297 — — 10,297

Change in cumulative foreign currency translation adjustment — — — — — — ( 16,731 ) — ( 16,731 )

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 246 ) — ( 246 )

Stock-based compensation — — 62,537 — — — — — 62,537

Repurchased common stock — — — ( 1,260 ) ( 200,012 ) — — — ( 200,012 )

Issuance of restricted stock, net of forfeitures and cancellations 77 1 ( 1 ) — — — — — —

Net share settlement of restricted stock awards ( 32 ) — ( 5,109 ) — — — — — ( 5,109 )

Call option related to Nordeus Acquisition — — — — — — — ( 12,375 ) ( 12,375 )

Balance, September 30, 2021 138,891 $ 1,390 $ 2,475,085 ( 23,681 ) $ ( 1,020,584 ) $ 2,033,524 $ ( 19,747 ) $ — $ 3,469,668

Three Months Ended September 30, 2020

Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders'

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

Net income — — — — — 99,321 — 99,321

Change in cumulative foreign currency translation adjustment — — — — — — 18,861 18,861

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 1,554 ) ( 1,554 )

Stock-based compensation — — 45,675 — — — — 45,675

Issuance of restricted stock, net of forfeitures and cancellations 115 1 ( 1 ) — — — — —

Net share settlement of restricted stock awards ( 59 ) ( 1 ) ( 9,695 ) — — — — ( 9,696 )

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

See accompanying Notes.

Six Months Ended September 30, 2021

Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders'

Shares Amount Shares Amount

Balance, March 31, 2021 137,584 $ 1,376 $ 2,288,781 ( 22,421 ) $ ( 820,572 ) $ 1,870,971 $ ( 8,664 ) $ 3,331,892

3 unchanged sentences

Stock-based compensation — — 136,304 — — — — 136,304

Repurchased common stock — — — ( 1,260 ) ( 200,012 ) — — ( 200,012 )

Issuance of restricted stock, net of forfeitures and cancellations 1,020 10 ( 10 ) — — — — —

2 unchanged sentences

Issuance of shares related to Nordeus acquisition 515 5 94,149 — — — — 94,154

Call option related to Nordeus Acquisition — — — — — — — 12,375 12,375

Balance, June 30, 2021 138,846 $ 1,389 $ 2,417,658 ( 22,421 ) $ ( 820,572 ) $ 2,023,227 $ ( 2,770 ) $ 12,375 $ 3,631,307

Three Months Ended June 30, 2020

Balance, September 30, 2021 138,891 $ 1,390 $ 2,475,085 ( 23,681 ) $ ( 1,020,584 ) $ 2,033,524 $ ( 19,747 ) $ 3,469,668

Six Months Ended September 30, 2020

Common Stock Additional

11 unchanged sentences

Stock-based compensation — — 94,712 — — — — 94,712

Repurchased common stock — — — — — — — —

Issuance of restricted stock, net of forfeitures and cancellations 1,094 11 ( 11 ) — — — — —

1 unchanged sentence

Employee share purchase plan settlement 65 1 6,502 — — — — 6,503

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

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

See accompanying Notes.

29 unchanged sentences

Disaggregation of revenue

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

Timing of recognition

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).

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

Three Months Ended June 30,

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.

Net revenue by timing of recognition was as follows:

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

2021 2020 2021 2020

Net revenue recognized:

Service and other $ 633,638 $ 532,050

Product 179,708 299,260

Service and other (over time) $ 609,025 $ 551,576 $ 1,242,663 $ 1,083,626

Product (point in time) 249,173 289,566 428,881 588,826

Total net revenue $ 858,198 $ 841,142 $ 1,671,544 $ 1,672,452

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 June 30,

Net revenue by content was as follows:

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

2021 2020 2021 2020

Net revenue recognized:

4 unchanged sentences

Net revenue by geographic region was as follows:

Three Months Ended June 30,

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

2021 2020 2021 2020

Net revenue recognized:

3 unchanged sentences

Net revenue by platform was as follows:

Three Months Ended June 30,

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

2021 2020 2021 2020

Net revenue recognized:

6 unchanged sentences

Net revenue by distribution channel was as follows:

Three Months Ended June 30,

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

2021 2020 2021 2020

Net revenue recognized:

4 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 June 30, 2021 and March 31, 2021 were $ 875,838 and $ 965,331 , respectively.

For the three months ended June 30, 2021, 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 June 30, 2021 and 2020, $ 463,241 and $ 371,213 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of June 30, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 998,074 , 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 September 30, 2021 and March 31, 2021 were $ 1,003,143 and $ 965,331 , respectively.

For the three months ended September 30, 2021, 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, 2021 and 2020, $ 278,306 and $ 241,732 , 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, 2021 and 2020, $ 741,547 and $ 612,946 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of September 30, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,152,076 , which includes our deferred revenue balances and amounts to be invoiced and recognized in future periods.

We expect to recognize approximately $ 1,035,546 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 June 30, 2021 and March 31, 2021, our contract asset balances were $ 103,772 and $ 105,554 , respectively, which are recorded within Prepaid expenses and other in our Condensed Consolidated Balance Sheets.

As of September 30, 2021 and March 31, 2021, our contract asset balances were $ 107,865 and $ 105,554 , respectively, which are recorded within Prepaid expenses and other in our Condensed Consolidated Balance Sheets.

MANAGEMENT AGREEMENT

3 unchanged sentences

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 $ 1,705 and $ 2,665 during the three months ended June 30, 2021 and 2020, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZelnickMedia, which is included in General and administrative expenses, of $ 7,218 and $ 6,740 during the three months ended June 30, 2021 and 2020, respectively.

In consideration for ZelnickMedia's services, we recorded consulting expense (a component of General and administrative expenses) of $ 1,705 and $ 2,605 during the three months ended September 30, 2021 and 2020, respectively, and $ 3,410 and $ 5,270 during the six months ended September 30, 2021 and 2020, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZelnickMedia, which is included in General and administrative expenses, of $ 7,365 and $ 6,887 during the three months ended September 30, 2021 and 2020, respectively, and $ 14,583 and $ 13,657 during the six months ended September 30, 2021 and 2020, respectively.

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

Three Months Ended June 30,

Six Months Ended September 30,

Time-based 51 79

14 unchanged sentences

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 449 and 588 as of June 30, 2021 and March 31, 2021, respectively.

During the three months ended June 30, 2021, 315 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 449 and 588 as of September 30, 2021 and March 31, 2021, respectively.

During the three and six months ended September 30, 2021, 315 restricted stock units previously granted to ZelnickMedia vested, and no restricted stock units were forfeited by ZelnickMedia.

FAIR VALUE MEASUREMENTS

8 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.

June 30, 2021 Quoted prices

September 30, 2021 Quoted prices

(level 1) Significant

4 unchanged sentences

Commercial paper 19,439 — 19,439 — Cash and cash equivalents

US Agencies 5,000 — 5,000 — Cash and cash equivalents

Corporate bonds 1,001 — 1,001 — Cash and cash equivalents

Corporate bonds 707,115 — 707,115 — Short-term investments

27 unchanged sentences

Total recurring fair value measurements, net $ 2,976,627 $ 2,199,225 $ 769,824 $ 7,578

In connection with the Nordeus acquisition (see Note 1 5 - Ac quisiti ons ), we recorded $ 78,664 as the initial fair value of contingent earn-out consideration.

Due to the timing of the acquisition, the preliminary initial fair value was estimated using a simplified approach that had a limited number of scenarios and inputs, including projected financial information and relevant discount rates, which are considered significant unobservable Level 3 inputs.

Subsequently, we will finalize our initial fair value using several scenarios and additional inputs, including market volatility.

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 three months ended June 30, 2021.

In connection with the Nordeus acquisition (see Note 15 - Acquisitions ), we recorded $ 61,055 as the initial fair value of contingent earn-out consideration.

The fair value was estimated using a Monte-Carlo simulation model, which included significant unobservable Level 3 inputs, such as projected financial performance over the earn-out period along with estimates for market volatility and the discount rate applicable to potential cash payouts.

During the three months ended September 30, 2021, we recognized General and administrative expense of $ 20,000 within our Condensed Consolidated Statements of Operations for the increase in fair value of the contingent earn-out consideration liability associated with the Nordeus acquisition, which increased the fair value of the contingent consideration liability to $ 81,181 .

The increase resulted from a higher probability of Nordeus achieving certain performance measures in the 12 - and 24 -month periods following the closing.

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, 2021.

Nonrecurring fair value measurements

3 unchanged sentences

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

At June 30, 2021, we held $ 20,000 of such investments in Other assets within our Condensed Consolidated Balance Sheet.

At September 30, 2021, we held $ 20,000 of such investments in Other assets within our Condensed Consolidated Balance Sheet.

SHORT-TERM INVESTMENTS

Our Short-term investments consisted of the following:

June 30, 2021

September 30, 2021

Amortized Cost Gains Losses Fair Value

17 unchanged sentences

Total Short-term investments $ 1,307,895 $ 1,053 $ ( 256 ) $ 1,308,692

The following table summarizes the contracted maturities of our short-term investments at June 30, 2021:

June 30, 2021

The following table summarizes the contracted maturities of our short-term investments at September 30, 2021:

September 30, 2021

Short-term investments

9 unchanged sentences

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

June 30, 2021 March 31, 2021

September 30, 2021 March 31, 2021

Forward contracts to sell foreign currencies $ 153,127 $ 140,510

Forward contracts to purchase foreign currencies 93,453 92,123

For the three months ended June 30, 2021 and 2020, we recorded a loss of $ 1,828 and a loss of $ 2,657 , respectively, related to foreign currency forward contracts in Interest and other, net in our Condensed Consolidated Statements of Operations.

For the three months ended September 30, 2021 and 2020, we recorded a gain of $ 602 and a loss of $ 1,029 , respectively, and for the six months ended September 30, 2021 and 2020 we recorded a loss of $ 1,226 and a loss of $ 3,685 , 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.

1 unchanged sentence

Inventory balances by category were as follows:

June 30, 2021 March 31, 2021

September 30, 2021 March 31, 2021

Finished products $ 9,926 $ 16,941

1 unchanged sentence

Inventory $ 12,579 $ 17,742

Estimated product returns included in Inventory at June 30, 2021 and March 31, 2021 were $ 220 and $ 186 , respectively.

Estimated product returns included in Inventory at September 30, 2021 and March 31, 2021 were $ 123 and $ 186 , respectively.

SOFTWARE DEVELOPMENT COSTS AND LICENSES

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

June 30, 2021 March 31, 2021

September 30, 2021 March 31, 2021

Current Non-current Current Non-current

3 unchanged sentences

Software development costs and licenses $ 54,540 $ 621,470 $ 43,443 $ 490,892

During the three months ended June 30, 2021 and 2020, we recorded $ 9,771 and $ 19,695 , respectively, of software development impairment charges (a component of Cost of goods sold).

The impairment charge recorded during the three months ended June 30, 2021, and 2020, respectively, 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 September 30, 2021 and 2020, we recorded $ 55,278 and $ 0 , respectively, of software development impairment charges (a component of Cost of goods sold).

The impairment charge recorded during the three months ended September 30, 2021, related to (i) a decision not to proceed with further development of certain interactive entertainment software and (ii) recognizing 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 six months ended September 30, 2021 and 2020, we recorded $ 65,049 and $ 19,695 , respectively, of software development impairment charges (a component of Cost of goods sold).

The impairment charge recorded during the six months ended September 30, 2021 related to (i) a decision not to proceed with further development of certain interactive entertainment software and (ii) recognizing 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.

The impairment charges 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.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

June 30, 2021 March 31, 2021

September 30, 2021 March 31, 2021

Software development royalties $ 1,077,989 $ 814,998

10 unchanged sentences

In addition, the Credit Agreement contains uncommitted incremental capacity permitting the incurrence of up to an additional $ 200,000 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 June 30, 2021) or (b) 1.125 % to 1.750 % above LIBOR (approximately 0.10 % at June 30, 2021), which rates are determined by reference to our consolidated total net leverage ratio.

We had no outstanding borrowings at June 30, 2021.

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, 2021) or (b) 1.125 % to 1.750 % above LIBOR (approximately 0.09 % at September 30, 2021), which rates are determined by reference to our consolidated total net leverage ratio.

We had no outstanding borrowings at September 30, 2021.

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

June 30, 2021 March 31, 2021

September 30, 2021 March 31, 2021

Available borrowings $ 247,782 $ 197,874

Outstanding letters of credit 2,218 2,126

We recorded interest expense and fees related to the Credit Agreement of $ 145 and $ 82 for the three months ended June 30, 2021 and 2020, respectively.

We recorded interest expense and fees related to the Credit Agreement of $ 113 and $ 82 for the three months ended September 30, 2021 and 2020, respectively, and $ 257 and $ 164 for the six months ended September 30, 2021 and 2020, 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 create, incur, assume or be liable for indebtedness;

7 unchanged sentences

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

Three Months Ended June 30,

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

2021 2020 2021 2020

Computation of Basic earnings per share:

8 unchanged sentences

Diluted earnings per share $ 0.09 $ 0.86 $ 1.39 $ 1.63

During the three months ended June 30, 2021, 943 restricted stock awards vested, we granted 893 unvested restricted stock awards, and 17 unvested restricted stock awards were forfeited.

During the six months ended September 30, 2021, 1,020 restricted stock awards vested, we granted 896 unvested restricted stock awards, and 36 unvested restricted stock awards were forfeited.

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Three Months Ended June 30, 2021

Six Months Ended September 30, 2021

adjustments Unrealized

4 unchanged sentences

Other comprehensive income (loss) before reclassifications ( 10,599 ) ( 484 ) ( 11,083 )

Amounts reclassified from accumulated other comprehensive loss — — —

Balance at June 30, 2021 $ ( 3,150 ) $ 380 $ ( 2,770 )

Three Months Ended June 30, 2020

Balance at September 30, 2021 $ ( 19,881 ) $ 134 $ ( 19,747 )

Six Months Ended September 30, 2020

adjustments Unrealized

9 unchanged sentences

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

Balance at June 30, 2020 $ ( 55,834 ) $ 600 $ — $ 3,103 $ ( 52,131 )

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

COMMITMENTS AND CONTINGENCIES

We have entered into various agreements in the ordinary course of business that require substantial cash commitments over the next several years.

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, 2021, we did not have any significant changes to our commitments since March 31, 2021.

Other than agreements entered into in the ordinary course of business and in addition to the agreements requiring known cash commitments as reported in Note 15 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, we did not have any significant changes to our commitments since March 31, 2021.

Legal and Other Proceedings

2 unchanged sentences

While it is reasonably possible that a loss may be incurred in excess of the amounts accrued in our financial statements, we believe that such losses, unless otherwise disclosed, would not be material.

The provision for income taxes for the three months ended June 30, 2021 is based on our projected annual effective tax rate for fiscal year 2022, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 19,188 for the three months ended June 30, 2021, as compared to $ 1,856 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 11.2 % for the three months ended June 30, 2021 was due primarily to a tax benefit of $ 12,082 due to tax credits and excess tax benefits of $ 9,448 from employee stock-based compensation and the geographic mix of earnings.

The provision for income taxes for the three months ended September 30, 2021 is based on our projected annual effective tax rate for fiscal year 2022, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 9,677 for the three months ended September 30, 2021, as compared to $ 18,097 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 48.4 % for the three months ended September 30, 2021 was due primarily to a tax expense of $ 5,440 from a shortfall on employee stock-based compensation, tax expense of $ 2,389 related to a nondeductible increase in fair value of the contingent consideration liability associated with the acquisition of Nordeus, offset by $ 2,647 related to the geographic mix of earnings.

The provision for income taxes for the six months ended September 30, 2021 is based on our projected annual effective tax rate for fiscal year 2022, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 28,865 for the six months ended September 30, 2020 as compared to $ 19,953 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 15.1 % for the six months ended September 30, 2021 was due primarily to a tax benefit of $ 11,420 due to tax credits and excess tax benefits of $ 4,007 from employee stock-based compensation offset by tax expense of $ 2,389 related to a nondeductible increase in fair value of the contingent consideration liability associated with the acquisition of Nordeus and by the geographic mix of earnings.

We are regularly examined by domestic and foreign taxing authorities.

3 unchanged sentences

Nordeus Acquisition

On June 1, 2021, we completed the acquisition of 94.5 % of Nordeus Limited ("Nordeus"), a privately-held Irish holding company of a Belgrade, Serbia based free-to-play mobile game developer, for consideration of $ 120,488 in cash, 515 shares of our common stock, and a contingent earn-out consideration arrangement that requires us to pay up to an aggregate of $ 153,000 in cash if Nordeus achieves certain performance measures over the 12 - and 24 -month periods following the closing.

On June 1, 2021, we completed the acquisition of 94.5 % of Nordeus Limited ("Nordeus"), a privately-held Irish holding company of a Belgrade, Serbia based free-to-play mobile game developer, for initial consideration of $ 120,488 in cash, 515 shares of our common stock, and a contingent earn-out consideration arrangement that requires us to pay up to an aggregate of $ 153,000 in cash if Nordeus achieves certain performance measures over the 12 - and 24 -month periods following the closing.

The cash portion was funded from our cash on hand.

In addition to the shares we acquired, we have a call option to purchase the remaining 5.5 % of the outstanding equity of Nordeus for cash consideration of $ 12,375 in September 2021.

We are accounting for the call option as Non-controlling interest in our Condensed Statement of Stockholder's Equity.

Income attributable to our Non-controlling interest for the three months ended June 30, 2021 is immaterial.

In addition, we exercised our option to purchase the remaining 5.5 % of the outstanding equity of Nordeus for cash consideration of $ 12,375 , in September 2021.

We acquired Nordeus 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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Fair value of purchase consideration

Cash $ 120,488

Cash, including call option exercise $ 132,863

Common stock ( 515 shares)

Call option 12,375

Contingent earn-out 61,055

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This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820.

(Refer to Note 4 - Fair Value Meas uremen ts .) As of June 30, 2021, there were no significant changes in the range of outcomes for the contingent earn-out consideration recognized as a result of the acquisition of Nordeus.

We reported $ 28,294 within Accrued expenses and $ 50,370 within Other long-term liabilities in our Condensed Consolidated Balance Sheet.

(Refer to Note 4 - Fair Value Measurements .)

During the three months ended September 30, 2021, we recognized an increase in fair value of the contingent consideration liability associated with the acquisition of Nordeus.

We reported $ 44,167 within Accrued expenses and $ 37,014 within Other long-term liabilities in our Condensed Consolidated Balance Sheet as of September 30, 2021.

We used the acquisition method of accounting and recognized assets and liabilities at their fair value as of the date of acquisition, with the excess recorded to goodwill.

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The amounts of revenue and earnings of Nordeus included in our Condensed Consolidated Statement of Operations from the acquisition date are as follows:

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021 Six Months Ended September 30, 2021

Net revenue $ 10,290 $ 12,226

Net loss $ 15,245 $ 19,735

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the three months ended June 30, 2021 and 2020, as though the acquisition had occurred on April 1, 2020, the beginning of fiscal year 2021, and Nordeus had been included in our consolidated results for the entire periods subsequent to that date.

Three Months Ended June 30,

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the three and six months ended September 30, 2021 and 2020, as though the acquisition had occurred on April 1, 2020, the beginning of fiscal year 2021, and Nordeus 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,

2021 2020 2021 2020

Pro forma Net revenue $ 858,198 $ 853,035 $ 1,681,388 $ 1,694,299

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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, 2020.

Transaction costs of $ 2,003 for the three months ended June 30, 2021, 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 $ 2,949 and $ 4,952 for the three and six months ended September 30, 2021, 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.

Asset Acquisition

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Total $ 71,523

SHARE REPURCHASE

Our Board of Directors has authorized the repurchase of up to 14,218 shares of our common stock.

Under this program, we may purchase shares from time to time through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws.

Repurchases are subject to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance, and other conditions.

The program does not require us to repurchase shares and may be suspended or discontinued at any time for any reason.

During the three months ended September 30, 2021, we repurchased 1,260 shares of our common stock in the open market for $ 200,012 , including commissions of $ 13 , as part of the program.

We have repurchased a total of 11,660 shares of our common stock under the program, and, as of September 30, 2021, 2,558 shares of our common stock remained available for repurchase under the share repurchase program.

In November 2021, our Board of Directors authorized an increase of 7,442 shares to the number of shares available for repurchase, resulting in an aggregate of 21,660 total shares being authorized for repurchase under the program and 10,000 shares remaining available for repurchase as of the date of the additional authorization.

All of the repurchased shares are classified as Treasury stock in our Condensed Consolidated Balance Sheets.

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