What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-05-17 compared with 2021-05-19 · 251 added, 157 removed, 1354 unchanged (23% of the section changed)

13 unchanged sentences

Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of March 31, 2022.

In accordance with SEC guidance, our management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Playdots, which we acquired in September 2020 and is included in the March 31, 2021 Consolidated Financial Statements and constituted 3.2% of consolidated total assets as of March 31, 2021.

In accordance with SEC guidance, our management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Nordeus, which we acquired in June 2021 and is included in the March 31, 2022 Consolidated Financial Statements and constituted 5.6% of consolidated total assets as of March 31, 2022.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our internal control over financial reporting, which is included in this Form 10-K.

3 unchanged sentences

We are continually monitoring and assessing the effect of the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

On September 4, 2020, we acquired Playdots.

We are currently in the process of incorporating the internal controls and procedures of Playdots into our internal control over financial reporting for purposes of our assessment of and report on internal control over financial reporting for the fiscal year ending March 31, 2022.

On June 1, 2021, we acquired Nordeus.

We are currently in the process of incorporating the internal controls and procedures of Nordeus into our internal control over financial reporting for purposes of our assessment of and report on internal control over financial reporting for the fiscal year ending March 31, 2023.

Other Information

18 unchanged sentences

(ii) Financial Statement Schedule.

See Note 2 1 - Supplement ary F inancial Information to our Consolidated Financial Statements.

(iii) Index to Exhibits:

See Note 21 - Supplementary Financial Information to our Consolidated Financial Statements.

Index to Exhibits:

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

2.1 Agreement and Plan of Merger, dated as of August 17, 2020, by and among Take-Two Interactive Software, Inc., Dash MS, LLC, Dash MS II, LLC, Playdots, Inc.

and Shareholder Representative Services LLC, as Stockholder Representative

1.1 Underwriting Agreement, dated as of April 7, 2022, by and among Take-Two Interactive Software, Inc., J.P.

Morgan Securities LLC and Wells Fargo Securities, LLC, as representatives of the several underwriters named in Schedule 1 thereto

8-K 4/13/2022 1.1

2.1 Agreement and Plan of Merger, dated as of January 9, 2022, by and among Take-Two Interactive Software, Inc., Zebra MS I, Inc., Zebra MS II, Inc.

an d Zynga Inc.

8-K 1/10/2022 2.1

2.2 First Amendment to the Agreement and Plan of Merger, dated March 10, 2022, among Take-Two Interactive Software, Inc., Zebra MS I, Inc., Zebra MS II, Inc.

and Zynga Inc.

S-4 3/14/2022 2.2

2.3 Second Amendment to the Agreement and Plan of Merger, dated as of May 4, 2022, by and among Take-Two Interactive Software, Inc., Zebra MS I, Inc., Zebra MS II, Inc.

and Zynga Inc.

8-K 5/5/2022 2.1

2.4 Take-Two Interactive Software, Inc.

Voting Agreement

S-4 3/14/2022 2.3

2.5 Form of Zynga Inc.

Voting Agreement signed by Zynga's executive officers and directors (other than Mark Pincus)

S-4 3/14/2022 2.4

2.6 Zynga Inc.

Voting Agreement signed by Mark Pincus and certain of his respective affiliates

S-4 3/14/2022 2.5

3.1 Restated Certificate of Incorporation

12 unchanged sentences

8-A12B 3/26/2008 4.2

3.4 Second Amended and Restated Bylaws of Take-Two Interactive Software, Inc., effective as of June 20, 2019

3.4 Take-Two Interactive Software, Inc.'s Third Amended and Restated By-Laws, as adopted and effective on January 9, 2022

8-K 1/10/2022 3.1

1 unchanged sentence

10-K 5/22/2020 4.1

4.2 Base Indenture, dated as of April 14, 2022, between Take-Two Interactive Software, Inc.

and The Bank of New York Mellon, as Trustee.

8-K 4/14/2022 4.1

4.3 First Supplemental Indenture, dated as of April 14, 2022, between Take-Two Interactive Software, Inc.

and The Bank of New York Mellon, as Trustee.

8-K 4/14/2022 4.2

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

4.4 Second Supplemental Indenture, dated as of April 14, 2022, between Take-Two Interactive Software, Inc.

and The Bank of New York Mellon, as Trustee.

8-K 4/14/2022 4.3

4.5 Third Supplemental Indenture, dated as of April 14, 2022, between Take-Two Interactive Software, Inc.

and The Bank of New York Mellon, as Trustee.

8-K 4/14/2022 4.4

4.6 Fourth Supplemental Indenture, dated as of April 14, 2022, between Take-Two Interactive Software, Inc.

and The Bank of New York Mellon, as Trustee.

8-K 4/14/2022 4.5

4.7 Form of Global Note representing 3.300% Senior Notes due 2024 (included as part of Exhibit 4.

8-K 4/14/2022 4.6

4.8 Form of Global Note representing 3.550% Senior Notes due 2025 (included as part of Exhibit 4.

8-K 4/14/2022 4.7

4.9 Form of Global Note representing 3.700% Senior Notes due 2027 (included as part of Exhibit 4.

8-K 4/14/2022 4.8

4.10 Form of Global Note representing 4.000% Senior Notes due 2032 (included as part of Exhibit 4.

8-K 4/14/2022 4.9

10.1 Take-Two Interactive Software, Inc.

28 unchanged sentences

S-8 9/4/2020 99.2

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.13 Take-Two Interactive Software, Inc.

13 unchanged sentences

10-Q 11/8/2017 10.6

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.18 Form of Non-Employee Director Stock Grant Agreement Pursuant to the Take-Two Interactive Software Inc.

13 unchanged sentences

10-Q 2/6/2015 10.1

10.25 Management Agreement, dated as of March 10, 2014, by and between the Company and ZelnickMedia Corporation +

8-K 3/10/2014 10.1

10.26 Restricted Unit Agreement, dated as of May 20, 2015, by and between the Company and ZelnickMedia Corporation +

S-3 ASR 5/20/2015 10.2

10.27 Amended and Restated Restricted Unit Agreement Pursuant to the Take-Two Interactive Software, Inc.

2009 Incentive Stock Plan, dated as of June 30, 2015 +

10-Q 8/10/2015 10.1

10.28 Amendment to the Restricted Stock Unit Agreement, dated as of March 31, 2016, by and between Take-Two Interactive Software, Inc.

and ZelnickMedia Corporation +

10.25 Management Agreement, dated as of November 17, 2017, by and between the Company and ZelnickMedia Corporation +

8-K 11/22/2017 10.1

10.29 Restricted Unit Agreement, dated as of May 20, 2016, by and between Take-Two Interactive Software, Inc.

and ZelnickMedia Corporation +

S-3 ASR 5/20/2016 10.2

10.30 Amendment to Amended and Restated Restricted Unit Agreement Pursuant to the Take Two Interactive Software, Inc.

2009 Incentive Stock Plan, dated as of February 7, 2017 +

10-Q 2/8/2017 10.3

10.31 Restricted Unit Agreement, dated as of May 25, 2017, by and between Take-Two Interactive Software, Inc.

10.26 Restricted Unit Agreement, dated as of April 13, 2018, by and between Take-Two Interactive Software, Inc.

and ZelnickMedia Corporation +

S-3 ASR 4/13/2018 10.2

10.32 Amendment to Amended and Restated Restricted Unit Agreement Pursuant to the Take-Two Interactive Software, Inc.

2009 Incentive Stock Plan, dated as of December 15, 2017 +

10-Q 2/8/2018 10.4

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.33 Management Agreement, dated as of November 17, 2017, by and between the Company and ZelnickMedia Corporation +

8-K 11/22/2017 10.1

10.27 Restricted Unit Agreement, dated as of April 15, 2019, by and between Take-Two Interactive Software, Inc.

10 unchanged sentences

S-3 ASR 4/13/2022 10.2

10.31 Management Agreement, dated as of May 3, 2022, by and between Take-Two Interactive Software, Inc.

and ZelnickMedia Corporation

8-K 5/05/2022 10.1

10.32 Credit Agreement, dated as of February 8, 2019, by and among Take-Two Interactive Software, Inc., the lender parties thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders, Wells Fargo Securities, LLC and JP Morgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A.

1 unchanged sentence

10-K 5/14/2019 10.35

10.33 First Amendment to Credit Agreement and Incremental Amendment, dated as of June 28, 2021, by and among Take-Two Interactive Software, Inc., certain domestic subsidiaries of the Company, Goldman Sachs Bank USA, N.A.

and Wells Fargo Bank, National Association †

10-Q 8/3/2021 10.3

10.34 Xbox 360 Publisher License Agreement dated November 17, 2005, between Microsoft Licensing, GP and the Company *

2 unchanged sentences

10-Q 6/5/2009 10.1

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.36 Amendment to the Xbox 360 Publisher License Agreement, dated November 22, 2011, between the Company and Microsoft Licensing, GP *

16 unchanged sentences

10-Q 11/6/2020 10.4

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.44 Lease Agreement between the Company and Moklam Enterprises, Inc.

17 unchanged sentences

10-Q 11/8/2018 10.1

10.51 Second Amendment to Lease, dated as of August 31, 2021 by and between Take-Two Interactive Software, Inc.

and DOLP 1133 Properties III LLC

10-Q 11/4/2021 10.1

10.52 Agreement for the Sale and Purchase of Shares in Nordeus Limited, dated as of June 1, 2021, by and among Take-Two Interactive Software, Inc., Nordeus Holding Limited and the guarantors named therein † **

10-Q 8/3/2021 10.2

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.53 Amended and Restated Commitment Letter, dated as of January 28, 2022 by and among JPMorgan Chase Bank, N.A., and Take-Two Interactive Software, Inc.

S-4 3/14/2022 99.1

21.1 Subsidiaries of the Company

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_______________________________________________________________________________

† Schedules omitted pursuant to item 601(b)(2) of Regulation S-K.

The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon its request.

† Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

A copy of any omitted schedule will be furnished supplementally to the U.S.

Securities and Exchange Commission upon request;

provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

+ Represents a management contract or compensatory plan or arrangement.

8 unchanged sentences

INDEX TO FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm ( Ernst & Young LLP , New York, New York , PCAOB ID 42 )

Consolidated Balance Sheets —At March 31, 2022 and 2021

13 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ( 2013 framework ) and our report dated May 16, 2022 expressed an unqualified opinion thereon.

Adoption of ASU No.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases effective April 1, 2019 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842) and the related amendments.

Basis for Opinion

35 unchanged sentences

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the internally developed software costs process.

For example, we tested controls over management’s evaluation of products that established technological feasibility.

For example, we tested the control over management’s evaluation of products that established technological feasibility.

To test the Company’s capitalization of internally developed software costs, we performed audit procedures that included, among others, inspecting underlying documentation to support management’s conclusion on the establishment of technological feasibility in accordance with the applicable accounting standards.

9 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2022, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Playdots, Inc., which is included in the March 31, 2021 consolidated financial statements of the Company and constituted 3% of total assets as of March 31, 2021 and 1% of revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Playdots, Inc.

As indicated in the accompanying Management’s Report on Internal Control Over Financial reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Nordeus Limited, which is included in the March 31, 2022 consolidated financial statements of the Company and constituted 5.6% of total assets as of March 31, 2022 and 1.5% of net revenue for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Nordeus Limited.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended March 31, 2022, and the related notes and our report dated May 16, 2022 expressed an unqualified opinion thereon.

52 unchanged sentences

Total liabilities $ 2,736,560 $ 2,696,326

Commitments and contingencies

Commitments and contingencies (See Note 15 )

Stockholders' equity:

5 unchanged sentences

Treasury stock, at cost;

22,421 common shares at March 31, 2021 and 2020, respectively

23,681 and 22,421 common shares at March 31, 2022 and 2021, respectively

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

22 unchanged sentences

Income before income taxes 465,398 677,816 458,439

Provision for (benefit from) income taxes 88,930 53,980 ( 101,052 )

Provision for income taxes 47,376 88,930 53,980

Net income $ 418,022 $ 588,886 $ 404,459

29 unchanged sentences

Stock-based compensation 182,969 110,472 257,881

Noncash lease expense 34,511 30,553 21,037

Amortization of intellectual property 64,817 32,241 20,990

Depreciation 61,196 56,309 47,628

Impairment of software development costs and licenses 70,611 39,073 —

Amortization of debt issuance costs 6,525 — —

Deferred income taxes 8,104 10,631 ( 3,486 )

18 unchanged sentences

Business acquisitions, net of cash acquired ( 161,331 ) ( 102,469 ) ( 12,040 )

Net cash (used in) provided by investing activities ( 806,724 ) 4,049 ( 223,576 )

Other 822 — —

Net cash provided by (used in) investing activities 139,216 ( 806,724 ) 4,049

Financing activities:

2 unchanged sentences

Issuance of common stock 19,657 14,214 10,515

Cost of debt ( 12,150 ) — —

Other ( 234 ) — —

Net cash used in financing activities ( 256,813 ) ( 57,338 ) ( 77,453 )

25 unchanged sentences

Stock-based compensation — — 192,845 — — — — 192,845

Repurchased common stock — — — ( 3,716 ) ( 362,392 ) — — ( 362,392 )

Issuance of restricted stock, net of forfeitures and cancellations 1,970 19 ( 19 ) — — — — —

Conversion of 1.00 % Convertible Notes Due 2018

377 4 8,108 — — — — 8,112

Net share settlement of restricted stock awards ( 771 ) ( 8 ) ( 87,960 ) — — — — ( 87,968 )

Impact from adoption of New Revenue Accounting Standard — — — — — 470,273 4,653 474,926

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

2 unchanged sentences

Change in cumulative foreign currency translation adjustment — — — — — — 51,253 51,253

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 3,332 ) ( 3,332 )

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

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — 3,364 3,364

Stock-based compensation — — 113,741 — — — — 113,741

2 unchanged sentences

Employee share purchase plan settlement 139 2 14,212 — — — — 14,214

Issuance of shared related to Playdots, Inc.

acquisitions 604 6 97,641 — — — — 97,647

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

1 unchanged sentence

Change in cumulative foreign currency translation adjustment — — — — — — ( 43,589 ) ( 43,589 )

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

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 5,092 ) ( 5,092 )

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

Stock-based compensation — — 258,701 — — — — 258,701

2 unchanged sentences

Employee share purchase plan settlement 143 1 19,656 — — — — 19,657

Issuance of shares related to Playdots, Inc.

Issuance of shares related to Nordeus.

acquisition 515 5 94,149 — — — — 94,154

8 unchanged sentences

We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe.

We develop and publish products principally through Rockstar Games, 2K, Private Division, Social Point and Playdots.

Our products are designed for console gaming systems and personal computers, including smart phones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services.

We develop and publish products principally through Rockstar Games, 2K, Private Division, and T2 Mobile Games.

Our products are designed for console gaming systems, personal computers ("PC"), and mobile including smart phones and tablets ("Mobile"), and are delivered through physical retail, digital download, online platforms, and cloud streaming services.

Pending Acquisition of Zynga

On January 9, 2022, we entered into a definitive merger agreement to acquire Zynga Inc.

("Zynga"), a leading developer of mobile games.

Refer to Note 23 - Sub sequent Ev ents for additional information.

Principles of Consolidation

9 unchanged sentences

the recoverability and amortization of software development costs, licenses, and intangible assets;

assets acquired and liabilities assumed in business combinations;

assets acquired and liabilities assumed in business combinations, including the valuation of contingent earn-out consideration;

the realization of deferred income taxes;

20 unchanged sentences

One customer accounted for 38.0 %, 38.9 % and 31.9 % of net revenue during the fiscal years ended March 31, 2022, 2021, and 2020, respectively.

A second customer accounted for 22.2 %,

20.0 %, and 18.1 % of net revenue during the fiscal years ended March 31, 2021, 2020, and 2019 respectively.

A third customer accounted for 10.5 % of net revenue during the fiscal year ended March 31, 2019.

A second customer accounted for 22.0 %, 22.2 %, and 20.0 % of net revenue during the fiscal years ended March 31, 2022, 2021, and 2020 respectively.

As of March 31, 2022 and 2021, five customers accounted for 72.8 % and 77.6 % of our gross accounts receivable, respectively.

2 unchanged sentences

We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2022 and 2021.

Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers and our past collection experience, we believe that the receivable balances from these largest customers do not represent a significant credit risk.

Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers who sell our physical products and our past collection experience, we believe that the receivable balances from these largest customers do not represent a significant credit risk.

Cash and Cash Equivalents

We consider all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents.

Our restricted cash and cash equivalents balances are primarily related to a dedicated account limited to the payment of certain internal royalty obligations.

Our restricted cash and cash equivalents balances are primarily related to dedicated accounts limited to the payment of certain internal royalty obligations.

Balances that are restricted from use for more than one year are classified as non-current.

38 unchanged sentences

For capitalized licenses, amortization is calculated as a ratio of (1) current year revenue to the total revenue expected to be recorded over the remaining estimated life of the title or (2) the contractual royalty rate based on actual net product sales as defined in the licensing agreement, whichever is greater.

Amortization periods for our software products generally range from twelve to 30 months.

Amortization periods for our software products generally range from 12 to 30 months.

We evaluate the future recoverability of capitalized software development costs and licenses on a quarterly basis.

10 unchanged sentences

Leasehold improvements are amortized over the lesser of the term of the related lease or the useful life of the underlying asset, typically seven years .

Buildings are depreciated over the remaining life of the buildings, which is typically approximately 30 years.

The cost of additions and improvements are capitalized, and repairs and maintenance costs are charged to operations, in the periods incurred.

When depreciable assets are retired or sold, the cost and related allowances for depreciation are removed from the accounts and the gain or loss, if any, is recognized.

When depreciable assets are retired or sold, the cost and related allowances for depreciation are

removed from the accounts and the gain or loss, if any, is recognized.

The carrying amounts of these assets are recorded at historical cost.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting for leases codified under Topic 842, Leases , which we adopted on April 1, 2019.

We determine if an arrangement is a lease at contract inception.

34 unchanged sentences

Based on our annual impairment assessment process for goodwill, no impairments were recorded during the fiscal years ended March 31, 2022, 2021, or 2020.

As of March 31, 2021, the goodwill balance of one of our reporting units is $ 345,725 , and a moderate reduction in its fair value may result in an impairment charge, which would be equal to the excess of the carrying value over the fair value of such assets.

Long-lived Assets

21 unchanged sentences

Revenue Recognition

We derive revenue primarily from the sale of our interactive entertainment content, principally for console gaming systems and personal computers, including smartphones and tablets.

We derive revenue primarily from the sale of our interactive entertainment content, principally for console gaming systems, personal computers, and Mobile.

Our interactive entertainment content consists of full game software products that may contain offline gameplay, online gameplay, or a combination of offline and online gameplay.

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In certain countries, we use third-party licensees to distribute and host our games in accordance with license agreements, for which the licensees typically pay us a fixed minimum guarantee and sales-based royalties.

These arrangements typically include multiple performance obligations, such as an upfront license of intellectual property and rights to future

Based on the allocated transaction price, we recognize revenue associated with the minimum guarantee when we transfer control of the upfront license of intellectual property (generally upon commercial launch) and the remaining portion ratably over the contractual term in which we provide the licensee with future update rights.

These arrangements typically include multiple performance obligations, such as an upfront license of intellectual property and rights to future updates.

Based on the allocated transaction price, we recognize revenue associated with the minimum guarantee when we

transfer control of the upfront license of intellectual property (generally upon commercial launch) and the remaining portion ratably over the contractual term in which we provide the licensee with future update rights.

Royalty payments in excess of the minimum guarantee are generally recognized when the licensed product is sold by the licensee.

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When a new game is launched and therefore no history of online player data is available, we consider other factors to determine the user life, such as the estimated service period of other games actively being sold with similar characteristics.

We also consider known online trends, the service periods of our previously released software products, and, to the extent publicly available, the service periods of our competitors’ software products that are

similar in nature to ours.

We believe this provides a reasonable depiction of the transfer of our game related services to our customers, as it is the best representation of the period during which our customers play our software products.

We believe this provides a reasonable depiction of the transfer of our game related services to our

customers, as it is the best representation of the period during which our customers play our software products.

Determining the estimated service period is subjective and requires significant management judgment and estimates.

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Significant Estimates

Significant management judgment and estimates must be used in connection with many of the determinations described above, such as estimating the fair value allocation to distinct and separable performance obligations, the service period over which to defer recognition of revenue, the time it takes our physical products to sell-through to end users, and the amounts of price protection.

We believe we can make reliable estimates.

2 unchanged sentences

We expense marketing costs as incurred, except for production costs associated with media advertising, which are deferred and charged to expense when the related advertisement is run for the first time.

Advertising, marketing, and other

promotional expenses for the fiscal years ended March 31, 2021, 2020 and 2019 amounted to $ 241,068 , $ 285,607 and $ 249,315 , respectively, and are included in Selling and marketing expense in our Consolidated Statements of Operations.

Advertising, marketing, and other promotional expenses for the fiscal years ended March 31, 2022, 2021 and 2020 amounted to $ 297,299 , $ 241,068 and $ 285,607 , respectively, and are included in Selling and marketing expense in our Consolidated Statements of Operations.

Stock-based Compensation

21 unchanged sentences

Recently Adopted Accounting Pronouncements

Accounting for Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements by removing, modifying, or adding certain disclosures.

We adopted this update effective April 1, 2020.

The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

Accounting for Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses , which replaces the incurred loss impairment methodology in current U.S.

GAAP with a methodology that requires the reflection of expected credit losses and also requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.

It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

For most financial instruments, the standard requires the use of a forward-looking expected loss model rather than

the incurred loss model for recognizing credit losses, which generally results in the earlier recognition of credit losses on financial instruments.

We adopted this update effective April 1, 2020 under a modified retrospective basis.

No adjustment to retained earnings was recorded as a result of the adoption of this standard, which did not have an impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

Accounting for Income Taxes

1 unchanged sentence

Simplifying the Accounting for Income Taxes , which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law.

We adopted this update effective April 1, 2021.

The adoption of this update did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

Accounting for Government Assistance

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance , which requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on any entity's financial statements.

We adopted this update effective April 1, 2022.

We are currently evaluating the potential impact of adopting this guidance on our disclosures.

Accounting for Contract Assets and Contract Liabilities

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

Under this new standard, deferred revenue acquired in a business combination is measured pursuant to ASC 606 , Revenue from Contracts with Customers , rather than its assumed acquisition date fair value under the current guidance.

ASU 2021-08 is effective for fiscal years, and interim periods within those fiscal years, beginning December 15, 2022 (April 1, 2023 for the Company), with early adoption permitted.

We do not expect that the impact of the adoption will be material to our Consolidated Financial Statements.

However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted.

We early adopted this update for our fiscal year 2023 on April 1, 2022.

There was no impact of adopting this guidance on our Consolidated Financial Statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

Service and other revenue

Service and other revenue is primarily comprised of revenue from our software products that include game related services, or separate 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 service and other revenue and product was as follows:

2 unchanged sentences

Net revenue recognized:

Service and other $ 2,281,555 $ 1,839,696 $ 1,319,033

Product 1,091,217 1,249,274 1,349,361

Service and other (over time) $ 2,461,619 $ 2,281,555 $ 1,839,696

Product (point in time) 1,043,181 1,091,217 1,249,274

Total net revenue $ 3,504,800 $ 3,372,772 $ 3,088,970

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.

20 unchanged sentences

PC and other 572,506 581,702 594,619

Mobile 403,437 274,077 185,749

Total net revenue $ 3,504,800 $ 3,372,772 $ 3,088,970

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MANAGEMENT AGREEMENT

In November 2017, we entered into a new management agreement (the "2017 Management Agreement") with ZelnickMedia Corporation ("ZelnickMedia") that replaced our previous agreement with ZelnickMedia and pursuant to which ZelnickMedia provides financial and management consulting services to the Company through March 31, 2024.

In November 2017, we entered into a management agreement (the "2017 Management Agreement") with ZelnickMedia Corporation ("ZelnickMedia") that replaced our previous agreement with ZelnickMedia and pursuant to which ZelnickMedia provides financial and management consulting services to the Company through March 31, 2024.

The 2017 Management Agreement became effective January 1, 2018.

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See Note 17 - Stock-Based Compensation for a discussion of such awards.

In May 2022, we entered into a new management agreement (the "2022 Management Agreement") with ZelnickMedia that, once effective, will replace the 2017 Management Agreement and pursuant to which ZelnickMedia will continue to provide financial and management consulting services to the Company through March 31, 2029.

The 2022 Management Agreement will become effective when our pending acquisition of Zynga closes (refer to Note 23 - Subsequent Ev ents ).

As part of the 2022 Management Agreement, Strauss Zelnick, the President of ZelnickMedia, will continue to serve as Executive Chairman and Chief Executive Officer of the Company, and Karl Slatoff, a partner of ZelnickMedia, will continue to serve as President of the Company.

The 2022 Management Agreement provides for an annual management fee of $ 3,300 over the term of the agreement and a maximum annual bonus opportunity of $ 13,200 over the term of the agreement, based on the Company achieving certain performance thresholds.

In connection with the 2022 Management Agreement, we expect to grant time-based and performance-based restricted units to ZelnickMedia.

FAIR VALUE MEASUREMENTS

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(level 3) Balance Sheet Classification

Money market funds $ 837,614 $ 837,614 $ — $ — Cash and cash equivalents

Bank-time deposits $ 636,000 $ 636,000 $ — $ — Cash and cash equivalents

Money market funds 501,903 501,903 — — Cash and cash equivalents

Commercial paper 119,377 — 119,377 — Cash and cash equivalents

US Treasuries 51,977 51,977 — — Cash and cash equivalents

Certificates of Deposit 10,005 — 10,005 — Cash and cash equivalents

Corporate bonds 2,801 — 2,801 — Cash and cash equivalents

Money market funds 356,830 356,830 — — Restricted cash and cash equivalents

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Bank-time deposits 131,797 131,797 — — Short-term investments

US Treasuries 60,086 60,086 — — Short-term investments

Commercial paper 125,390 — 125,390 — Short-term investments

Asset-backed securities 470 — 470 — Short-term investments

Money market funds 98,541 98,541 — — Long-term restricted cash and cash equivalents

US Treasuries 23,414 23,414 — — Short-term investments

Certificates of Deposit 999 — 999 — Short-term investments

Private equity 16,134 — — 16,134 Other assets

Money market funds 103,452 103,452 — — Restricted cash and cash equivalents, long term

Foreign currency forward contracts ( 202 ) — ( 202 ) — Accrued expenses and other current liabilities

Contingent earn-out consideration ( 66,025 ) — — ( 66,025 ) Accrued expenses and other current liabilities

Contingent earn-out consideration ( 43,030 ) — — ( 43,030 ) Other long-term liabilities

Total recurring fair value measurements, net $ 2,509,813 $ 1,805,904 $ 796,830 $ ( 92,921 )

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Commercial paper 100,105 — 100,105 — Cash and cash equivalents

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

Money market funds 528,659 528,659 — — Restricted cash and cash equivalents

Bank-time deposits 563 563 — — Restricted cash and cash equivalents

Corporate Bonds 521,224 — 521,224 — Short-term investments

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Commercial paper 148,150 — 148,150 — Short-term investments

Cross-currency swap 11,275 — 11,275 — Prepaid expenses and other

Asset-backed securities 470 — 470 — Short-term investments

Money market funds 98,541 98,541 — — Long-term restricted cash and cash equivalents

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

In connection with the Nordeus acquisition (see Note 22 - 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 fiscal year ended March 31, 2022, we recognized General and administrative expense of $ 48,000 within our 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 $ 109,055 .

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 fiscal year ended March 31, 2022.

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Commercial paper 125,390 — — 125,390

Asset-backed securities 469 1 — 470

Certificates of Deposit 999 — — 999

Total short-term investments $ 825,820 $ 4 $ ( 5,764 ) $ 820,060

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Commercial paper 148,149 1 — 148,150

Asset-backed securities 469 1 — 470

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

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Our risk management strategy includes the use of derivative financial instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates.

We do not enter into derivative financial contracts for speculative or trading purposes.

We do not enter into derivative financial contracts

for speculative or trading purposes.

We classify cash flows from derivative transactions as cash flows from operating activities in our Consolidated Statements of Cash Flows.

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Forward contracts to purchase foreign currencies $ 75,807 $ 92,123

For the fiscal years ended March 31, 2021, 2020 and 2019, we recorded a loss of $ 3,584 , a loss of $ 959 , and a gain of $ 16,831 , respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.

Our derivative contracts are foreign currency exchange forward contracts that 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.

For the fiscal years ended March 31, 2022, 2021 and 2020, we recorded a gain of $ 5,887 , a loss of $ 3,584 , and a loss of $ 959 , respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.

These instruments are generally short term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates.

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Amortization and impairment, net of stock-based compensation $ 153,279 $ 144,263 $ 167,925

The impairment charges related (i) to unamortized capitalized costs for the development of certain interactive entertainment software products, which are anticipated to exceed the net realizable value of the asset, and (ii) to decisions not to proceed with further development of certain interactive entertainment software products.

The impairment charges related to (i) a decision not to proceed with further development of certain interactive entertainment software products, 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.

FIXED ASSETS, NET

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Balance at March 31, 2020 $ 386,494

Acquisition of Playdots, Inc.

Additions from immaterial acquisitions 13,260

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Balance at March 31, 2021 $ 535,306

Acquisition of Playdots, Inc.

(see Note 22 )

Acquisition of Nordeus (see Note 22 )

Additions from immaterial acquisitions 35,305

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Value Weighted average useful life

Developed game technology $ 143,628 $ ( 62,667 ) $ 80,961 $ 64,336 $ ( 42,425 ) $ 21,911 6 years

Intellectual property $ 229,840 $ ( 42,308 ) $ 187,532 $ 41,077 $ ( 14,542 ) $ 26,535 6 years

Analytics technology 32,768 ( 27,256 ) 5,512 30,711 ( 19,450 ) 11,261 5 years

Developed game technology 152,488 ( 83,231 ) 69,257 143,628 ( 62,667 ) 80,961 8 years

Branding and trade names 11,061 ( 3,545 ) 7,516 8,245 ( 2,245 ) 6,000 8 years

Lease-in-place 2,296 ( 659 ) 1,637 — — — 4 years

User base 9,400 ( 8,867 ) 533 6,200 ( 3,617 ) 2,583 1 year

Analytics technology 30,687 ( 30,687 ) — 32,768 ( 27,256 ) 5,512 0 years

Total intangible assets $ 435,772 $ ( 169,297 ) $ 266,475 $ 231,918 $ ( 110,327 ) $ 121,591 5 years

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Licenses 81,138 84,330

Deferred acquisition payments 78,553 13,343

Refund Liability 51,711 53,361

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Credit Agreement

On February 8, 2019, we entered into an unsecured credit agreement (the “Credit Agreement”) that runs through February 8, 2024.

On February 8, 2019, we entered into an unsecured credit agreement (the “Credit Agreement”) , and on June 28, 2021, we amended our unsecured Credit Agreement solely to increase the commitments under the facility by $ 50,000 (as amended, the “Credit Agreement”) that runs through February 8, 2024.

The Credit Agreement provides for an unsecured five-year revolving credit facility with commitments of $ 250,000 , including sublimits for (i) the issuance of letters of credit in an aggregate face amount of up to $ 25,000 and (ii) borrowings and letters of credit denominated in Pounds Sterling, Euros and Canadian Dollars in an aggregate principal amount of up to $ 25,000 .

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Outstanding letters of credit $ 2,523 $ 2,126

We recorded interest expense and fees related to the Credit Agreement of $ 355 , $ 275 and $ 372 , for the fiscal years ended March 31, 2021, 2020 and 2019, respectively and, under a prior credit agreement that was terminated on the same day that we entered into the Credit Agreement, $ 472 for the fiscal year ended March 31, 2019.

We recorded interest expense and fees related to the Credit Agreement of $ 450 , $ 355 and $ 275 , for the fiscal years ended March 31, 2022, 2021 and 2020.

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;

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In addition, the Credit Agreement provides for certain events of default such as nonpayment of principal and interest when due thereunder, breaches of representations and warranties, noncompliance with covenants, acts of insolvency and default on indebtedness held by third parties (subject to certain limitations and cure periods).

During the fiscal year ended March 31, 2022, in connection with our pending acquisition of Zynga, we received a bridge loan commitment of $ 2.7 billion from J.P.

Morgan and certain other lenders and recognized expense related to interest and fees of $ 6,075 within Interest and other, net in our Consolidated Statements of Operations.

At March 31, 2022, $ 6,075 of deferred financing costs remained within Prepaid expenses and other on our Consolidated Balance Sheet.

The bridge loan was terminated in April 2022 as a result of our debt offering.

Refer to Note 23 - Subsequent Events .

EARNINGS PER SHARE ("EPS")

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Our lease arrangements are primarily for (1) corporate, administrative, and development studio offices and (2) data centers and server equipment.

Our existing leases have remaining lease terms ranging from one to thirteen years .

Our existing leases have remaining lease terms ranging from one to sixteen years .

In certain instances, such leases include one or more options to renew, with renewal terms that generally extend the lease term by one to five years for each option.

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Fiscal Year Ended March 31,

2022 2021 2020

Operating lease costs $ 46,252 $ 37,300 $ 29,383

Short term lease costs $ 1,414 $ 1,148 $ 2,771

Rent expense prior to our adoption of Topic 842 amounted to $ 29,204 for the fiscal year ended March 31, 2019.

Fiscal Year Ended March 31,

2022 2021 2020

Supplemental operating cash flow information

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ROU assets obtained in exchange for lease obligations $ 74,016 $ 34,638 $ 58,745

2022 2021 2020

Weighted average information

Remaining lease term 8.61 years 8.90 years

Remaining lease term 10.09 years 8.61 years 8.90 years

Discount rate 4.29 % 4.91 % 4.98 %

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Total lease liabilities $ 250,218

As of March 31, 2021, we have entered into facility leases that have not yet commenced with future lease payments of approximately $ 5,709 .

These leases are expected to commence within the next twelve months and will have lease terms ranging from three to nine years .

COMMITMENTS AND CONTINGENCIES

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We have certain minimum marketing support commitments where we commit to spend specified amounts related to marketing our products.

Marketing commitments expire at various times through September 2025 and primarily reflect our agreements with major sports leagues and players' associations.

Marketing commitments expire at various times through March 2027 and primarily reflect our agreements with major sports leagues and players' associations.

Purchase Obligations:

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Total deferred income taxes 11,898 37,150 13,783

Provision for (benefit from) income taxes $ 88,930 $ 53,980 $ ( 101,052 )

Provision for income taxes $ 47,376 $ 88,930 $ 53,980

A reconciliation of our effective tax rate to the U.S.

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Excess tax benefits from stock-based compensation ( 3.1 ) % ( 2.0 ) % ( 1.8 ) %

One-time transition tax — % — % ( 2.0 ) %

Earn-out adjustments 2.1 % — % — %

Valuation allowance—domestic ( 0.1 ) % 0.1 % 0.2 %

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Commissioner.

(2) Fiscal year ended March 31, 2020 includes effects of a deferred tax asset and valuation allowance associated with a tax basis step up received in Switzerland related to the Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020.

(2) Fiscal year ended March 31, 2022 includes effects of an increase of the deferred tax asset related to the Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020.

Fiscal year ended March 31, 2020 includes effects of a deferred tax asset and valuation allowance associated with a tax basis step up received in Switzerland related to TRAF.

(3) Tax benefits were recorded for fiscal years ended March 31, 2022, 2021, and 2020 attributable to certain tax credits related to software development activities.

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At March 31, 2022, we had domestic net operating loss carryforwards totaling $ 32,955 of which $ 13,131 will expire in 2023 to 2028, $ 13,210 will expire from 2029 to 2032, and $ 6,614 will expire in 2035 to 2041.

In addition, we had foreign net operating loss carryforwards of $ 10,236 , of which $ 1,170 will expire in 2028 and the remainder may be carried forward indefinitely.

In addition, we had foreign net operating loss carryforwards of $ 39,074 , of which $ 18,438 will expire from 2026 to 2028, $ 7,317 will expire from 2041 to 2042 and the remainder may be carried forward indefinitely.

At March 31, 2022, we had domestic tax credit carryforwards totaling $ 194,517 , of which $ 47,743 expire in 2039 to 2043, and the remainder may be carried forward indefinitely.

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Stock-based compensation expense before income taxes $ 182,969 $ 110,472 $ 257,881

Income tax benefit $ ( 21,746 ) $ ( 48,687 ) $ ( 48,383 )

Income tax provision/(benefit) $ ( 35,435 ) $ ( 21,746 ) $ ( 48,687 )

Stock-based compensation expense, net of income tax benefit $ 147,534 $ 88,726 $ 209,194

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(1) Represents the maximum number of shares eligible to vest.

Time-based restricted stock units granted in fiscal year 2021 will vest on April 13, 2022, provided that the 2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2020 vested on April 13, 2021.

Market-based restricted stock units granted in fiscal year 2021 are eligible to vest on April 13, 2022, provided that the 2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2020 vested on April 13, 2021.

Time-based restricted stock units granted in fiscal year 2022 will vest on April 13, 2023, provided that the 2017 Management Agreement or the 2022 Management Agreement, as applicable, has not been terminated prior to such vesting date, and those granted in fiscal 2021 vested on April 13, 2022.

Market-based restricted stock units granted in fiscal year 2022 are eligible to vest on April 13, 2023, provided that the 2017 Management Agreement or the 2022 Management Agreement, as applicable, has not been terminated prior to such vesting date, and those granted in fiscal 2021 vested on April 13, 2022.

Market-based restricted stock units are eligible to vest based on our Total Shareholder Return (as defined in the relevant grant agreement) relative to the Total Shareholder Return (as defined in the relevant grant agreement) of the companies that constitute the NASDAQ Composite Index as of the grant date measured over a two-year period.

To earn the target number of market-based restricted stock units (which represents 50 % of the number of the market-based restricted stock units set forth in the table above), the Company must perform at the 50th percentile, with the maximum number of market-based restricted stock units earned if the Company performs at least at the 75th percentile.

Performance-based restricted stock units granted in fiscal year 2021 are eligible to vest on April 13, 2022, provided that the 2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2020 vested on April 13, 2021.

Performance-based restricted stock units granted in fiscal year 2022 are eligible to vest on April 13, 2023, provided that the 2017 Management Agreement or the 2022 Management Agreement, as applicable, has not been terminated prior to such vesting date, and those granted in fiscal 2021 vested on April 13, 2022.

Performance-based restricted stock units, of which 50 % are tied to "IP" and 50 % to "RCS" (as defined in the relevant grant agreement), are eligible to vest based on the Company's achievement of certain performance metrics (as defined in the relevant grant agreement) of either individual product releases of "IP" or "RCS" measured over a two-year period.

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The ESPP is administered by the Compensation Committee of the Board of Directors and allows for eligible employees an option to purchase shares of our common stock, which the employee may or may not exercise during an offering period.

Eligible employees may authorize payroll deductions of between 1 % and 10 % of their compensation to purchase shares of common stock at 85% of the lower of

the market price of our common stock on the date of commencement of the applicable offering period or on the last day of each six-month purchase period.

Eligible employees may authorize payroll deductions of between 1 % and 10 % of their compensation to purchase shares of common stock at 85% of the lower of the market price of our common stock on the date of commencement of the applicable offering period or on the last day of each six-month purchase period.

The fair value is determined using the Black-Scholes valuation model.

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Treasury yields in effect at the time of grant for the expected term of the option.

Expected volatility is based on a combination of historical stock price volatility and implied volatility of publicly-traded options on our common stock.

Expected volatility is based on historical stock price volatility.

Expected term is determined based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior.

The following table summarizes the assumptions used in the Black-Scholes valuation model to value our purchase rights:

Fiscal Year Ended March 31, Fiscal Year Ended March 31,

Fiscal Year Ended March 31,

Risk-free interest rate — %

1.6 % - 2.4 %

Expected stock price volatility 27.7 % - 33.2 %

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SHARE REPURCHASE PROGRAM

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

Our Board of Directors has authorized the repurchase of up to 21,660 shares of our common stock, including an increase of 7,442 shares in November 2021.

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.

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Other comprehensive income (loss) before reclassifications ( 43,589 ) — — ( 5,092 ) ( 48,681 )

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

Tax effect on cross-currency swap — — 845 — 845

Balance at March 31, 2022 $ ( 52,871 ) $ — $ — $ ( 4,474 ) $ ( 57,345 )

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Valuation allowance for deferred income taxes $ 49,413 44,703 ( 7,179 ) — $ 86,937

$ 195,640 11,850 ( 107,133 ) ( 50,944 ) $ 49,413

Allowance for doubtful accounts 995 — ( 547 ) ( 5 ) 443

(1) Amount categorized as Other represents a reduction to the valuation allowance included in the cumulative effect of initially applying the New Revenue Accounting Standard as an adjustment to the opening balance of Retained earnings, due to revenues that were previously deferred being accelerated to Retained earnings, for which a timing difference exists for accounting and tax purposes.

On September 4, 2020, we completed the acquisition of privately-held Playdots, Inc.

("Playdots"), a New York, New York based free-to-play mobile game developer, for consideration of $ 97,846 in cash and 604 shares of our common stock.

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 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.

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

During the fiscal year ended March 31, 2021, we paid out $ 3,840 of this amount.

As of March 31, 2021, $ 9,600 remained accrued within Accrued expenses and other current liabilities within our 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.

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.

The acquisition-date fair value of the consideration totaled $ 289,774 , which consisted of the following:

Fair value of purchase consideration

Cash $ 97,846

Cash, including call option exercise $ 132,863

Common stock ( 515 shares)

Contingent earn-out $ 61,055

Deferred payment $ 1,702

Total $ 289,774

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

The preliminary fair values of net tangible and intangible assets are management’s estimates based on the information available at the acquisition date and may change over the measurement period, which will end no later than one year from the acquisition date, to the extent additional information is received.

The following table summarizes the preliminary acquisition date fair value of net tangible and intangible assets acquired, net of liabilities assumed from Playdots:

The fair value of the contingent earn-out consideration arrangement at the acquisition date was $ 61,055 .

We estimated the fair value of the contingent earn-out consideration using a Monte Carlo simulation model.

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 Measurements .)

During the fiscal year ended March 31, 2022, we recognized General and administrative expense of $ 48,000 , within our Consolidated Statements of Operations for the increase in fair value of the contingent earn-out consideration liability associated with the acquisition of Nordeus.

We reported $ 66,025 within Accrued expenses and $ 43,030 within Other long-term liabilities in our Consolidated Balance Sheet as of March 31, 2022.

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.

The following table summarizes the preliminary acquisition date fair value of net tangible and intangible assets acquired, net of liabilities assumed from Nordeus:

Fair Value Weighted average useful life

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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 March 31, 2021 are as follows:

The amounts of revenue and earnings of Nordeus included in our Consolidated Statement of Operations from the acquisition date to the fiscal year ending March 31, 2022 are as follows:

Fiscal Year Ended March 31, 2022

Net revenue $ 51,738

Net income (loss) $ ( 27,407 )

The following table summarizes the pro forma consolidated results of operations (unaudited) for the fiscal years ended March 31, 2021 and 2020, respectively, 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.

Net loss $ 26,759

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the fiscal year ended March 31, 2022, as though the acquisition had occurred on April 1, 2020, the beginning of our fiscal year 2021 and Nordeus had been included in our consolidated results for the entire periods subsequent to that date.

Fiscal Year Ended March 31,

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Pro forma Net income $ 425,401 $ 583,182

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 our accounting policies.

The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and Nordeus and not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of fiscal year 2021 and are not indicative of the future operating results of the combined company.

The financial information for Nordeus 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 Nordeus to align with our 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, 2020.

Transaction costs of $ 2,553 for the fiscal years ended March 31, 2021, which have been recorded within General and administrative expense in our 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 $ 5,100 for the fiscal year ended March 31, 2022, which have been recorded within General and administrative expense in our Consolidated Statements of Operations, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature.

Asset Acquisition

In June 2021, we acquired two office buildings in the United Kingdom to use for office space for total cash consideration of $ 72,908 .

The transaction was treated as an asset acquisition, in which the cash consideration and direct transaction costs were allocated on a relative fair value basis to identified assets.

The following table summarizes the acquisition date fair value of tangible assets, which are included within Fixed assets, net on our Consolidated Balance Sheets, and intangible assets, which are included within Intangible assets, net on our Consolidated Balance Sheets, acquired:

Fair Value Weighted average useful life

Building $ 31,104 30

Land 38,243 N/A

Lease-in-place intangible asset 2,176 4

Total $ 71,523

SUBSEQUENT EVENTS

Pending Acquisition

On January 9, 2022, we entered into a definitive merger agreement to acquire Zynga, a leading developer of mobile games.

Under the terms and subject to the conditions of the merger agreement, Zynga stockholders will receive $ 3.50 in cash and a number of shares of our common stock equal to the exchange ratio for each share of Zynga common stock outstanding at the closing.

The transaction is valued at $ 9.86 per share of Zynga common stock based on the market closing as of January 7, 2022, implying an enterprise value of $ 12.7 billion.

The transaction includes a collar mechanism on the equity consideration, so that if the volume weighted average price ("VWAP") of Take-Two common stock on the Nasdaq Global Select Market for the

consecutive period beginning at 9:30 a.m.

New York time on the twenty-third trading day immediately preceding the closing date of the transaction and concluding at 4:00 p.m.

New York time on the third trading day preceding such closing date is in a range from $ 156.50 to $ 181.88 , the exchange ratio would be adjusted to deliver total consideration of $ 9.86 per Zynga share.

If the VWAP of our common stock for the period noted in the prior sentence exceeds the higher end of that range the exchange ratio would be 0.0350 per share, and, if the VWAP is below the lower end of that range, the exchange ratio would be 0.0406 per share.

The transaction, which is currently anticipated to close during on Monday May 23, 2022, is subject to approval by Take-Two and Zynga stockholders and the satisfaction of the other customary closing conditions.

In connection with the transaction, on April 14, 2022, we completed our offering and sale of $ 2.7 billion aggregate principal amount of our senior notes, consisting of $ 1.0 billion principal amount of our 3.300 % Senior Notes due 2024 (the “2024 Notes”), $ 600 million principal amount of our 3.550 % Senior Notes due 2025 (the “2025 Notes”), $ 600 million principal amount of our 3.700 % Senior Notes due 2027 (the “2027 Notes”) and $ 500 million principal amount of our 4.000 % Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the 2027 Notes, the “Notes”).The Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee (the “Trustee”).

The Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations.

The 2024 Notes mature on March 28, 2024 and bear interest at an annual rate of 3.300 %.

The 2025 Notes mature on April 14, 2025 and bear interest at an annual rate of 3.550 %.

The 2027 Notes mature on April 14, 2027 and bear interest at an annual rate of 3.700 %.

The 2032 Notes mature on April 14, 2032 and bear interest at an annual rate of 4.000 %.

We will pay interest on the 2024 Notes semiannually on March 28 and September 28 of each year, commencing September 28, 2022.

We will pay interest on each of the 2025 Notes, 2027 Notes and 2032 Notes semi-annually on April 14 and October 14 of each year, commencing October 14, 2022.

ZelnickMedia Management Agreement

See Note 3 - Management Agreement for information relating to the 2022 Management Agreement entered into with ZelnickMedia.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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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-K

Item 9A. Controls and Procedures