What changed in this filing

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Item 1. Financial Statements

2023-02-07 compared with 2022-11-08 · 177 added, 135 removed, 822 unchanged (28% of the section changed)

3 unchanged sentences

(in millions, except per share amounts)

September 30, 2022 March 31, 2022

December 31, 2022 March 31, 2022

Current assets:

2 unchanged sentences

Restricted cash and cash equivalents 331.5 359.8

Accounts receivable, net of allowances of $ 1.3 and $ 0.4 at September 30, 2022 and March 31, 2022, respectively

Accounts receivable, net of allowances of $ 1.3 and $ 0.4 at December 31, 2022 and March 31, 2022, respectively

Software development costs and licenses 68.1 81.4

29 unchanged sentences

Preferred stock, $ 0.01 par value, 5.0 shares authorized;

no shares issued and outstanding at September 30, 2022 and March 31, 2022

no shares issued and outstanding at December 31, 2022 and March 31, 2022

Common stock, $ 0.01 par value, 300.0 and 200.0 shares authorized;

191.2 and 139.0 shares issued and 167.5 and 115.4 outstanding at September 30, 2022 and March 31, 2022, respectively

192.2 and 139.0 shares issued and 168.5 and 115.4 outstanding at December 31, 2022 and March 31, 2022, respectively

Additional paid-in capital 8,928.7 2,597.2

Treasury stock, at cost;

23.7 and 23.7 common shares at September 30, 2022 and March 31, 2022, respectively

23.7 and 23.7 common shares at December 31, 2022 and March 31, 2022, respectively

( 1,020.6 ) ( 1,020.6 )

7 unchanged sentences

(in millions, except per share amounts)

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

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

2022 2021 2022 2021

5 unchanged sentences

Selling and marketing 446.7 135.3 1,163.1 375.2

General and administrative 214.6 127.8 451.7 232.2

Research and development 238.2 116.7 655.2 310.5

General and administrative 168.9 130.8 620.6 363.0

Depreciation and amortization 35.0 16.0 86.0 44.6

14 unchanged sentences

Three Months Ended

September 30, Six Months Ended September 30,

December 31, Nine Months Ended December 31,

2022 2021 2022 2021

3 unchanged sentences

Change in fair value of available for sale securities 1.4 ( 1.4 ) $ 1.5 ( 1.8 )

Other comprehensive (loss) income ( 115.8 ) ( 16.9 ) $ ( 179.0 ) ( 11.0 )

Other comprehensive income (loss) 102.1 ( 14.9 ) $ ( 76.9 ) ( 25.9 )

Comprehensive (loss) income $ ( 51.3 ) $ 129.7 $ ( 591.3 ) $ 281.2

3 unchanged sentences

(in millions)

Six Months Ended September 30,

Nine Months Ended December 31,

Operating activities:

6 unchanged sentences

Depreciation 62.9 44.7

Impairment of software development costs and licenses 23.3 65.0

Amortization of debt issuance costs 12.3 —

17 unchanged sentences

Business acquisitions ( 3,241.8 ) ( 157.3 )

Acquisition related earn-outs ( 26.0 ) —

Other ( 4.8 ) 1.1

Net cash used in investing activities ( 2,814.8 ) ( 479.8 )

5 unchanged sentences

Cost of debt ( 22.4 ) —

Repayment of debt ( 200.0 ) —

Settlement of capped calls 140.1 —

1 unchanged sentence

Repurchase of common stock — ( 200.0 )

Payment of contingent earn-out consideration ( 26.9 ) —

Net cash provided by (used in) financing activities 1,904.6 ( 239.7 )

6 unchanged sentences

(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.

See accompanying Notes.

S ee accompanying Notes.

TAKE-TWO INTERACTIVE SOFTWARE, INC.

1 unchanged sentence

(in millions)

Three Months Ended September 30, 2022

Three Months Ended December 31, 2022

Common Stock Additional

1 unchanged sentence

Earnings Accumulated

Comprehensive(Loss) Income Total Stockholder's Equity

Comprehensive Income (Loss) Total Stockholder's Equity

Shares Amount Shares Amount

Balance, June 30, 2022 189.9 $ 1.9 $ 8,616.5 ( 23.7 ) $ ( 1,020.6 ) $ 2,185.0 $ ( 120.5 ) $ 9,662.3

Net loss — — — — — ( 257.0 ) — ( 257.0 )

Balance, September 30, 2022 191.2 $ 1.9 $ 8,760.5 ( 23.7 ) $ ( 1,020.6 ) $ 1,928.0 $ ( 236.3 ) $ 9,433.5

Net income — — — — — ( 153.4 ) — ( 153.4 )

Change in cumulative foreign currency translation adjustment — — — — — — 100.7 100.7

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — 0.5 0.5

Net unrealized gain on available-for-sale securities, net of tax — — — — — — 1.4 1.4

Stock-based compensation — — 104.2 — — — — 104.2

Repurchased common stock — — — — — — — —

Issuance of restricted stock, net of forfeitures and cancellations 0.4 — — — — — — —

Exercise of stock options 0.9 — 42.8 — — — — 42.8

Net share settlement of restricted stock awards ( 0.1 ) — ( 12.9 ) — — — — ( 12.9 )

Balance, September 30, 2022 191.2 $ 1.9 $ 8,760.5 ( 23.7 ) $ ( 1,020.6 ) $ 1,928.0 $ ( 236.3 ) $ 9,433.5

Three Months Ended September 30, 2021

Take-Two Interactive Software, Inc.

Exercise of stock options — — 0.1 — — — — 0.1

Issuance of shares related to Popcore acquisition 0.6 — 57.8 — — — — 57.8

Stock-based compensation assumed in Zynga Acquisition — — 8.1 — — — — 8.1

Employee share purchase plan settlement 0.1 — 10.9 — — — — 10.9

Balance, December 31, 2022 192.2 $ 1.9 $ 8,928.7 ( 23.7 ) $ ( 1,020.6 ) $ 1,774.6 $ ( 134.2 ) $ 9,550.4

Three Months Ended December 31, 2021

Common Stock Additional

2 unchanged sentences

Comprehensive

Income (Loss) Non-controlling interest Total Equity

Income (Loss) Total Stockholder's Equity

Shares Amount Shares Amount

Balance, June 30, 2021 138.8 $ 1.4 $ 2,417.7 ( 22.4 ) $ ( 820.6 ) $ 2,023.3 $ ( 2.8 ) $ 12.4 $ 3,631.4

Balance, September 30, 2021 138.9 $ 1.4 $ 2,475.1 ( 23.7 ) $ ( 1,020.6 ) $ 2,033.5 $ ( 19.7 ) $ 3,469.7

Net income — — — — — 144.6 — 144.6

2 unchanged sentences

Stock-based compensation — — 61.7 — — — — 61.7

Repurchased common stock — — — ( 1.3 ) ( 200.0 ) — — — ( 200.0 )

Issuance of restricted stock, net of forfeitures and cancellations 0.1 — — — — — — —

Net share settlement of restricted stock awards — — ( 5.8 ) — — — — ( 5.8 )

Call option related to Nordeus Acquisition — — — — — — — ( 12.4 ) ( 12.4 )

Balance, September 30, 2021 138.9 $ 1.4 $ 2,475.1 ( 23.7 ) $ ( 1,020.6 ) $ 2,033.5 $ ( 19.7 ) $ — $ 3,469.7

Employee share purchase plan settlement 0.1 — 10.4 — — — — 10.4

Balance, December 31, 2021 139.1 $ 1.4 $ 2,541.4 ( 23.7 ) $ ( 1,020.6 ) $ 2,178.1 $ ( 34.6 ) $ 3,665.7

See accompanying Notes.

Six Months Ended September 30, 2022

Nine Months Ended December 31, 2022

Common Stock Additional

15 unchanged sentences

Issuance of shares related to Zynga Acquisition 46.3 0.5 5,377.2 — — — — 5,377.7

Issuance of shares related to Popcore acquisition 0.6 — 57.8 — — — — 57.8

Stock-based compensation assumed in Zynga Acquisition — — 151.7 — — — — 151.7

Issuance of shares related to Zynga convertible notes 3.7 — 479.7 — — — — 479.7

Balance, September 30, 2022 191.2 $ 1.9 $ 8,760.5 ( 23.7 ) $ ( 1,020.6 ) $ 1,928.0 $ ( 236.3 ) $ 9,433.5

Six Months Ended September 30, 2021

Balance, December 31, 2022 192.2 $ 1.9 $ 8,928.7 ( 23.7 ) $ ( 1,020.6 ) $ 1,774.6 $ ( 134.2 ) $ 9,550.4

Nine Months Ended December 31, 2021

Common Stock Additional

15 unchanged sentences

Issuance of shares related to Nordeus acquisition 0.5 — 94.1 — — — — 94.1

Balance, September 30, 2021 138.9 $ 1.4 $ 2,475.1 ( 23.7 ) $ ( 1,020.6 ) $ 2,033.5 $ ( 19.7 ) $ 3,469.7

Balance, December 31, 2021 139.1 $ 1.4 $ 2,541.4 ( 23.7 ) $ ( 1,020.6 ) $ 2,178.1 $ ( 34.6 ) $ 3,665.7

See accompanying Notes.

27 unchanged sentences

Revenue Recognition

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

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

We also generate revenue from advertising within our software products.

117 unchanged sentences

The new guidance is effective for fiscal years beginning after December 15, 2021, with the new disclosures required on an annual basis, and can be applied either prospectively or retrospectively.

The Company adopted the new guidance on April 1, 2022 and will include the disclosures as required in its annual reporting with respect to any government assistance or grants subject to the scope of the guidance to the extent material.

We adopted the new guidance on April 1, 2022 and will include the disclosures as required in its annual reporting with respect to any government assistance or grants subject to the scope of the guidance to the extent material.

Accounting for Contract Assets and Contract Liabilities

19 unchanged sentences

Net revenue by timing of recognition was as follows:

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

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

2022 2021 2022 2021

6 unchanged sentences

Net revenue by content was as follows:

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

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

2022 2021 2022 2021

5 unchanged sentences

Net revenue by geographic region was as follows:

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

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

2022 2021 2022 2021

4 unchanged sentences

Net revenue by platform was as follows:

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

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

2022 2021 2022 2021

Net revenue recognized:

Console $ 551.9 $ 596.1 $ 1,159.1 $ 1,198.5

Mobile $ 721.2 $ 103.8 $ 1,820.9 $ 301.2

Console 561.4 665.5 1,720.5 1,864.0

PC and other 125.2 134.0 362.3 409.6

3 unchanged sentences

Net revenue by distribution channel was as follows:

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

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

2022 2021 2022 2021

5 unchanged sentences

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

The balance of deferred revenue, including current and non-current balances as of September 30, 2022 and March 31, 2022 were $ 1,193.8 and $ 936.2 , respectively.

For the six months ended September 30, 2022, the additions to our deferred revenue balance were primarily due to the acquisition of Zynga ( Note 14 - Acquisitions ), which added $ 333.1 to our deferred revenue balance and 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, 2022 and 2021, $ 259.3 and $ 278.3 , 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, 2022 and 2021, $ 698.9 and $ 741.5 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

During the three and six months ended September 30, 2022, $ 150.2 and $ 230.5 , respectively, of revenue was recognized from the deferred revenue balance acquired from the Zynga acquisition.

As of September 30, 2022, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,327.1 , which includes our deferred revenue balances and amounts to be invoiced and recognized as revenue in future periods.

The balance of deferred revenue, including current and non-current balances as of December 31, 2022 and March 31, 2022 were $ 1,167.4 and $ 936.2 , respectively.

For the nine months ended December 31, 2022, the additions to our deferred revenue balance were primarily due to the acquisition of Zynga ( Note 14 - Acquisitions ), which added $ 333.1 to our deferred revenue balance and cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were due primarily to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the three months ended December 31, 2022 and 2021, $ 115.6 and $ 121.3 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

During the nine months ended December 31, 2022 and 2021, $ 814.5 and $ 862.9 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

During the three and nine months ended December 31, 2022, $ 77.2 and $ 307.8 , respectively, of revenue was recognized from the deferred revenue balance acquired from the Zynga acquisition.

As of December 31, 2022, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,322.8 , which includes our deferred revenue balances and amounts to be invoiced and recognized as revenue in future periods.

We expect to recognize approximately $ 1,219.9 of this balance as revenue over the next 12 months, and the remainder thereafter.

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

As of September 30, 2022 and March 31, 2022, our contract asset balances were $ 87.6 and $ 104.9 , respectively.

As of December 31, 2022 and March 31, 2022, our contract asset balances were $ 84.4 and $ 104.9 , respectively.

MANAGEMENT AGREEMENT

11 unchanged sentences

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

In consideration for ZMC's services, we recorded consulting expense (a component of General and administrative expenses) of $ 1.2 and $ 1.7 during the three months ended September 30, 2022 and 2021, respectively, and $ 3.9 and $ 3.4 during the six months ended September 30, 2022 and 2021, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZMC, which is included in General and administrative expenses, of $ 13.0 and $ 7.4 during the three months ended September 30, 2022 and 2021, respectively, and $ 21.5 and $ 14.6 during the six months ended September 30, 2022 and 2021, respectively.

In consideration for ZMC's services, we recorded consulting expense (a component of General and administrative expenses) of $( 0.6 ) and $ 3.5 during the three months ended December 31, 2022 and 2021, respectively, and $ 3.3 and $ 6.9 during the nine months ended December 31, 2022 and 2021, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZMC, which is included in General and administrative expenses, of $ 12.9 and $ 7.3 during the three months ended December 31, 2022 and 2021, respectively, and $ 34.4 and $ 21.9 during the nine months ended December 31, 2022 and 2021, respectively.

In connection with the 2022 Management Agreement and 2017 Management Agreement, we have granted restricted stock units (in thousands) to ZMC as follows:

Six Months Ended September 30,

Nine Months Ended December 31,

Time-based 192 51

16 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 ZMC were 1.1 and 0.4 as of September 30, 2022 and March 31, 2022, respectively.

During the six months ended September 30, 2022, 0.2 restricted stock units previously granted to ZMC vested, and 0.1 restricted stock units were forfeited by ZMC.

The unvested portion of time-based, market-based and performance-based restricted stock units held by ZMC were 1.1 and 0.4 as of December 31, 2022 and March 31, 2022, respectively.

During the nine months ended December 31, 2022, 0.2 restricted stock units previously granted to ZMC vested, and 0.1 restricted stock units were forfeited by ZMC.

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.

September 30, 2022

December 31, 2022

Quoted prices

8 unchanged sentences

Bank-time deposits 18.7 — — 18.7

US Treasuries 5.0 — — 5.0

Commercial paper — 2.7 — 2.7

44 unchanged sentences

Total financial liabilities $ — $ ( 0.2 ) $ ( 109.0 ) $ ( 109.2 )

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, 2022.

We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the nine months ended December 31, 2022.

In connection with the Nordeus acquisition we completed on June 1, 2021, our consideration included a contingent earn-out consideration arrangement that requires us to pay an aggregate of $ 153.0 in cash if Nordeus achieves certain performance measures over the 12 - and 24 -month periods following the closing.

1 unchanged sentence

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, 2022, we paid $ 70.1 related to these earn-out consideration arrangements.

During the six months ended September 30, 2022, we recognized General and administrative expense of $ 13.0 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 related to the second earn-out period to $ 51.9 and is recorded within Accrued expenses and other current liabilities in our Condensed

Consolidated Balance Sheet as of September 30, 2022.

During the nine months ended December 31, 2022, we paid $ 70.1 related to these earn-out consideration arrangements.

During the three and nine months ended December 31, 2022, we recognized General and administrative expense of $ 6.8 and $ 19.8 , respectively, 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 related to the second earn-out period to $ 58.7 and is recorded within Accrued expenses and

other current liabilities in our Condensed Consolidated Balance Sheet as of December 31, 2022.

The increase resulted from a higher probability of Nordeus achieving certain performance measures in the second 12 -month period.

The remaining contingent earn-out consideration liability of $ 5.1 relates to immaterial earn-out arrangements from Zynga's historical acquisitions.

In connection with our acquisition of Popcore we completed on November 16, 2022, our consideration included a contingent earn-out consideration arrangement that requires us to pay an aggregate of $ 105.0 in cash if Popcore achieves certain performance measures over each of the three calendar years following the closing.

We recorded $ 24.5 as the initial fair value of contingent earn-out consideration.

At December 31, 2022, the balance is recorded within Other long-term liabilities in our Condensed Consolidated Balance Sheet.

The remaining contingent earn-out consideration liability of $ 3.5 recorded within Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheet as of December 31, 2022, relates to immaterial earn-out arrangements from Zynga's historical acquisitions.

For these acquisitions, we estimated the acquisition date fair value of the contingent consideration obligations using a discounted cash flow model.

4 unchanged sentences

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

At September 30, 2022, we held $ 7.0 of such investments in Other assets within our Condensed Consolidated Balance Sheet.

At December 31, 2022, and March 31, 2022, we held $ 8.0 and $ 20.0 , respectively, of such investments in Other assets within our Condensed Consolidated Balance Sheet.

SHORT-TERM INVESTMENTS

Our Short-term investments consisted of the following:

September 30, 2022

December 31, 2022

Amortized Cost Gains Losses Fair Value

3 unchanged sentences

Corporate bonds 250.9 — ( 3.7 ) 247.2

US Treasuries 5.0 — — 5.0

Commercial paper 2.7 — — 2.7

10 unchanged sentences

Total Short-term investments $ 825.9 $ — $ ( 5.8 ) $ 820.1

The following table summarizes the contracted maturities of our short-term investments at September 30, 2022:

September 30, 2022

The following table summarizes the contracted maturities of our short-term investments at December 31, 2022:

December 31, 2022

Short-term investments

9 unchanged sentences

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

September 30, 2022 March 31, 2022

December 31, 2022 March 31, 2022

Forward contracts to sell foreign currencies $ 241.9 $ 132.8

Forward contracts to purchase foreign currencies 90.0 75.8

For the three months ended September 30, 2022 and 2021, we recorded a loss of $ 4.6 and a gain of $ 0.6 , respectively, and for the six months ended September 30, 2022 and 2021 we recorded a loss of $ 2.6 and a loss of $ 1.2 , respectively, related to foreign currency forward contracts in Interest and other, net in our Condensed Consolidated Statements of Operations.

For the three months ended December 31, 2022 and 2021, we recorded a loss of $ 14.1 and a gain of $ 4.1 , respectively, and for the nine months ended December 31, 2022 and 2021 we recorded a loss of $ 16.7 and a gain of $ 2.9 , 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.

2 unchanged sentences

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

September 30, 2022 March 31, 2022

December 31, 2022 March 31, 2022

Current Non-current Current Non-current

3 unchanged sentences

Software development costs and licenses $ 68.1 $ 1,035.9 $ 81.4 $ 755.9

During the three months ended September 30, 2022 and 2021, we recorded $ 6.4 and $ 55.3 , respectively, of software development impairment charges (a component of Cost of revenue).

The impairment charges recorded during the three months ended September 30, 2022 related to 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 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, 2022 and 2021, we recorded $ 23.3 and $ 65.0 , respectively, of software development impairment charges (a component of Cost of revenue).

The impairment charges recorded during the six months ended September 30, 2022 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, 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 three months ended December 31, 2022 and 2021, we recorded $ 1.7 and $ 0.6 , respectively, of software development impairment charges (a component of Cost of revenue).

The impairment charges recorded during the three months ended December 31, 2022 and during the three months ended December 31, 2021 related to decisions not to proceed with further development of certain interactive entertainment software.

During the nine months ended December 31, 2022 and 2021, we recorded $ 25.0 and $ 65.7 , respectively, of software development impairment charges (a component of Cost of revenue).

The impairment charges recorded during the nine months ended December 31, 2022 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 nine months ended December 31, 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.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

September 30, 2022 March 31, 2022

December 31, 2022 March 31, 2022

Software development royalties $ 396.7 $ 615.7

Compensation and benefits 233.3 134.0

Tax payable 158.2 14.1

Deferred acquisition payments 140.8 78.6

Licenses 112.0 81.1

Marketing and promotions 124.4 30.6

Tax payable 102.4 14.1

Licenses 76.4 81.1

Refund liability 61.8 51.7

Sales tax liability 43.2 17.2

Interest payable 21.7 —

Professional fees 8.6 17.0

Sales tax liability 16.9 17.2

Other 104.0 $ 34.9

1 unchanged sentence

The components of Long-term debt, net on our Condensed Consolidated Balance Sheet were as follows:

Annual Interest Rate Maturity Date September 30, 2022 Fair Value (Level 2)

Annual Interest Rate Maturity Date December 31, 2022 Fair Value (Level 2)

2024 Notes 3.30 % March 28, 2024 $ 1,000.0 $ 976.8

2 unchanged sentences

2032 Notes 4.00 % April 14, 2032 500.0 442.4

2022 Credit Agreement 4.84 % May 23, 2027 200.0 200.0

2024 Convertible Notes 0.25 % June 1, 2024 22.5 22.5

4 unchanged sentences

The components of Short-term debt on our Condensed Consolidated Balance Sheet were as follows:

Annual Interest Rate Maturity Date September 30, 2022 Fair Value (Level 2)

Annual Interest Rate Maturity Date December 31, 2022 Fair Value (Level 2)

Term Loan 3.60 % June 21, 2023 $ 350.0 $ 350.0

Short-term debt $ 350.0

The interest expense as it relates to our debt is recorded within Interest and other, net in our Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2022 and was as follows:

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

The interest expense as it relates to our debt is recorded within Interest and other, net in our Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2022 and was as follows:

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

2024 Notes $ 8.3 $ 23.3

2 unchanged sentences

2032 Notes 5.0 14.2

2022 Credit Agreement 3.2 3.5

Term Loan 2.9 6.4

2022 Credit Agreement 2.4 4.1

Total $ 29.5 $ 78.9

The following table outlines the aggregate amount of maturities of our long-term borrowings, as of September 30, 2022:

The following table outlines the aggregate amount of maturities of our borrowings, as of December 31, 2022:

Fiscal Year Ended March 31, Maturities

5 unchanged sentences

During the fiscal year ended March 31, 2022, in connection with our acquisition of Zynga (refer to Note 14 - Acquisitions ), we received a bridge loan commitment of $ 2,700.0 .

The bridge loan commitment was terminated in April 2022 as a result of our Senior Notes debt offering discussed below.

During the six months ended September 30, 2022, we recognized expense related to interest and fees of $ 6.1 related to the bridge loan commitment within Interest and other, net in our Condensed Consolidated Statements of Operations.

The bridge loan commitment was terminated in April 2022 in connection with our Senior Notes debt offering discussed below.

During the nine months ended December 31, 2022, we recognized expense related to interest and fees of $ 6.1 related to the bridge loan commitment within Interest and other, net in our Condensed Consolidated Statements of Operations.

At April 30, 2022, all deferred financing costs related to the bridge loan commitment were fully amortized.

3 unchanged sentences

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

During the three months ended September 30, 2022, we made interest payments of $ 15.0 .

During the nine months ended December 31, 2022, we made interest payments of $ 15.0 .

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.

During the three and nine months ended December 31, 2022, we made interest payments of $ 31.8 .

The proceeds were used to finance a portion of our acquisition of Zynga.

8 unchanged sentences

These debt issuance costs and original issuance discount are included as a reduction of the debt within Long-term debt, net on our Condensed Consolidated Balance Sheet and will be amortized into Interest and other, net in our Consolidated Statements of Operations over the contractual term of the Senior Notes.

During the three months ended September 30, 2022, we recognized $ 1.4 of amortization of debt issuance costs and $ 0.1 of amortization of the original issuance discount.

During the six months ended September 30, 2022, we recognized $ 2.6 of amortization of debt issuance costs and $ 0.2 of amortization of the original issuance discount.

During the three months ended December 31, 2022, we recognized $ 1.4 of amortization of debt issuance costs and $ 0.1 of amortization of the original issuance discount.

During the nine months ended December 31, 2022, we recognized $ 4.0 of amortization of debt issuance costs and $ 0.3 of amortization of the original issuance discount.

Credit Agreement

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In addition, the 2022 Credit Agreement contains uncommitted incremental capacity permitting the incurrence of up to an additional amount not to exceed the greater of $ 250.0 and 35.0 % of the Company's Consolidated Adjusted EBITDA (as defined in the 2022 Credit Agreement).

Loans under the 2022 Credit Agreement will bear interest at a rate of (a) 0.000 % to 0.625 % above an alternate base rate ( 6.25 % at September 30, 2022) or (b) 1.000 % to 1.625 % above Secured Overnight Financing Rate ("SOFR"), approximately 3.04 % at September 30, 2022, which rates are determined by the Company's credit rating.

Loans under the 2022 Credit Agreement will bear interest at a rate of (a) 0.000 % to 0.625 % above an alternate base rate ( 7.50 % at December 31, 2022) or (b) 1.000 % to 1.625 % above Secured Overnight Financing Rate ("SOFR"), approximately 4.36 % at December 31, 2022, which rates are determined by the Company's credit rating.

The 2022 Credit Agreement also includes, among other terms and conditions, a maximum leverage ratio covenant, as well as customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur subsidiary indebtedness, grant liens, and dispose of all or substantially all assets, in each case subject to certain exceptions and baskets.

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Upon execution of the 2022 Credit Agreement, we incurred $ 3.5 of debt issuance costs that were capitalized within Other assets on our Condensed Consolidated Balance Sheet and will be amortized on a straight-line basis over the five-year term of the 2022 Credit Agreement, with the expense recorded within Interest and other, net in our Condensed Consolidated Statements of Operations.

During the three and six months ended September 30, 2022, we amortized $ 0.2 and $ 0.3 , respectively, of these debt issuance costs.

During the three and nine months ended December 31, 2022, we amortized $ 0.2 and $ 0.5 , respectively, of these debt issuance costs.

On June 22, 2022, we drew down $ 200.0 at approximately 3.28 % from our facility under the 2022 Credit Agreement, which constitutes senior unsecured indebtedness of the Company, ranking equally with all of our other existing and future senior unsecured unsubordinated obligations, and will record interest within Interest and other, net in our Condensed Consolidated Statement of Operations.

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The proceeds were used to finance a portion of the repurchase of the Convertible Notes (see below).

We had approximately $ 299.5 available for additional borrowings as of September 30, 2022.

During the three months ended September 30, 2022, we made interest payments of $ 1.7 .

In December 2022, we fully repaid the $ 200.0 drawdown.

As of December 31, 2022, there were no borrowings under the 2022 Credit Agreement, and we had approximately $ 499.5 available for additional borrowings.

During the nine months ended December 31, 2022, we made interest payments of $ 2.4 .

Information related to availability on our respective credit agreements for each period was as follows:

September 30, 2022 March 31, 2022

December 31, 2022 March 31, 2022

Available borrowings $ 499.5 $ 247.5

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The proceeds were used to finance a portion of the repurchase of the Convertible Notes (see below).

During the nine months ended December 31, 2022, we made interest payments of $ 6.4 .

Convertibles Notes

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In total, we paid $ 321.6 for the tendered or converted 2024 Convertible Notes, including interest, and $ 845.1 for the tendered 2026 Convertible Notes in cash, and we issued 3.7 shares of our common stock upon the conversion of the 2024 Convertible Notes.

After settlement of all Convertible Notes tendered or surrendered for conversion, $ 21.4 aggregate principal amount of the 2024 Convertible Notes remained outstanding and $ 29.4 aggregate principal amount of the 2026 Convertible Notes remained outstanding at September 30, 2022.

The 2024 Convertible Notes and 2026 Convertible Notes constitute senior unsecured indebtedness of Zynga, ranking pari passu with all of our other existing and future senior unsecured unsubordinated obligations of Zynga.

As a result the 2024 Convertible Notes and 2026 Convertible Notes are structurally senior to the indebtedness of the Company as to Zynga and its assets.

As a result the 2024 Convertible Notes and 2026 Convertible Notes are structurally senior to the indebtedness of the Company as to Zynga, its subsidiaries, and their respective assets.

As noted above, the Company also guaranteed the payment and other obligations of Zynga under the Convertible Notes.

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Upon any conversion, holders will receive either cash or a combination of cash and shares of Take-Two common stock, at our election.

As of September 30, 2022, the conditions allowing holders of the Convertible Notes to convert their respective series of the Convertible Notes have not been met and therefore both the Convertible Notes are not yet convertible.

As of December 31, 2022, the conditions allowing holders of the Convertible Notes to convert their respective series of the Convertible Notes have not been met, and, therefore, both the Convertible Notes are not yet convertible.

We have elected to account for these Convertible Notes, which are considered derivatives, using the fair value option (Level 2) under ASC 825, as the Convertible Notes were initially recognized at fair value under the acquisition method of accounting in connection with the Zynga Acquisition (refer to Note 14 - Acquisitions ) and we do not expect significant fluctuations in fair value through maturity.

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The fair value was determined as the expected cash payment and value of shares to be issued to settle the Convertible Notes.

As of September 30, 2022, we recorded $ 23.5 as the fair value of the remaining outstanding 2024 Convertible Notes, and $ 29.4 as the fair value of the remaining outstanding 2026 Convertible Notes, within Long-term debt, net in our Condensed Consolidated Balance Sheet.

During the three and six months ended September 30, 2022, we recognized a gain of $ 1.5 and a loss of $ 46.3 within Gain (loss) on fair value adjustments, net in our Condensed Consolidated Statements of Operations, which includes the loss recognized on the converted Convertible Notes.

As of December 31, 2022, we recorded $ 22.5 as the fair value of the remaining outstanding 2024 Convertible Notes, and $ 28.9 as the fair value of the remaining outstanding 2026 Convertible Notes, within Long-term debt, net in our Condensed Consolidated Balance Sheet.

During the three months ended December 31, 2022, we recognized a gain of $ 1.5 within Gain (loss) on fair value adjustments, net in our Condensed Consolidated Statements of Operations, which includes the loss recognized on the converted Convertible Notes.

During the nine months ended December 31, 2022, we recognized a loss of $ 44.8 within Gain (loss) on fair value adjustments, net in our Condensed Consolidated Statements of Operations, which includes the loss recognized on the converted Convertible Notes.

In connection with the Convertible Notes, Zynga also previously entered into privately negotiated Capped Call options with certain counterparties.

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Following the acquisition of Zynga, we entered into Termination Agreements with each counterparty related to the acquired Capped Call arrangements to be settled in cash.

Pursuant to the terms of the Termination Agreements, the Capped Call options will be terminated over a period of time specified in each Termination Agreement and each counterparty will owe a

cash payment to the Company, as applicable, as a result of the termination of the Capped Call options that will be calculated based on their fair market value calculated by each counterparty during a termination valuation period.

Pursuant to the terms of the Termination Agreements, the Capped Call options will be terminated over a period of time specified in each Termination Agreement and each counterparty will owe a cash payment to the Company, as applicable, as a result of the termination of the Capped Call options that will be calculated based on their fair market value calculated by each counterparty during a termination valuation period.

We have accounted for these Capped Calls as derivatives under ASC 815.

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The fair value (Level 2), in each instance, was determined based on negotiated termination agreements with the counterparties, which are dependent on our stock price over a certain period of time as further defined in the respective agreements.

During the six months ended September 30, 2022, we recognized a gain of $ 8.8 within Gain (loss) on fair value adjustments, net in our Consolidated Statements of Operations.

During the nine months ended December 31, 2022, we recognized a gain of $ 8.8 within Gain (loss) on fair value adjustments, net in our Consolidated Statements of Operations.

In July 2022, we received $ 140.1 in cash for settlement of these Capped Calls.

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

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

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

2022 2021 2022 2021

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Diluted (loss) earnings per share $ ( 0.91 ) $ 1.24 $ ( 3.27 ) $ 2.63

We incurred a net loss for the three and six months ended September 30, 2022;

We incurred a net loss for the three and nine months ended December 31, 2022;

therefore, the diluted weighted average shares outstanding exclude the effect of unvested common stock equivalents because their effect would be antidilutive.

For the three months ended September 30, 2022, we had 1.5 potentially dilutive shares from share-based awards and 0.2 of shares from Convertible Notes that are excluded due to the net loss for the period.

For the six months ended September 30, 2022, we had 1.6 potentially dilutive shares from share-based awards and 1.0 of shares from Convertible Notes that are excluded due to the net loss for the period.

During the six months ended September 30, 2022, 1.8 restricted stock awards vested, we granted 2.7 unvested restricted stock awards, and 1.2 unvested restricted stock awards were forfeited.

For the three months ended December 31, 2022, we had 1.0 potentially dilutive shares from share-based awards and 0.2 of shares from Convertible Notes that are excluded due to the net loss for the period.

For the nine months ended December 31, 2022, we had 1.5 potentially dilutive shares from share-based awards and 0.7 of shares from Convertible Notes that are excluded due to the net loss for the period.

During the nine months ended December 31, 2022, 2.2 restricted stock awards vested, we granted 3.2 unvested restricted stock awards, and 1.3 unvested restricted stock awards were forfeited.

The forfeiture of awards resulted in the reversal of expense of $ 48.7 and amounts capitalized as software development costs of $ 9.2 .

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

Six Months Ended September 30, 2022

Nine Months Ended December 31, 2022

adjustments Unrealized

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Other comprehensive loss before reclassifications ( 78.4 ) 1.5 ( 76.9 )

Balance at September 30, 2022 $ ( 231.9 ) $ ( 4.4 ) $ ( 236.3 )

Six Months Ended September 30, 2021

Balance at December 31, 2022 $ ( 131.2 ) $ ( 3.0 ) $ ( 134.2 )

Nine Months Ended December 31, 2021

adjustments Unrealized

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Other comprehensive income (loss) before reclassifications ( 24.1 ) ( 1.8 ) ( 25.9 )

Balance at September 30, 2021 $ ( 19.9 ) $ 0.2 $ ( 19.7 )

Balance at December 31, 2021 $ ( 33.4 ) $ ( 1.2 ) $ ( 34.6 )

COMMITMENTS AND CONTINGENCIES

A summary of annual minimum contractual obligations and commitments as of September 30, 2022 is as follows:

A summary of annual minimum contractual obligations and commitments as of December 31, 2022 is as follows:

Fiscal Year Ending March 31, Software

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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 benefit from income taxes for the three months ended September 30, 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The benefit from income taxes was $ 44.1 for the three months ended September 30, 2022, as compared to the provision for income taxes of $ 9.7 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 14.6 % for the three months ended September 30, 2022 was due primarily to tax benefits of $ 8.5 from tax credits, tax benefits of $ 3.4 from employee stock-based compensation, and tax expense of $ 12.8 related to geographic mix of earnings.

The benefit from income taxes for the six months ended September 30, 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The benefit from income taxes was $ 46.4 for the six months ended September 30, 2022, as compared to the provision for income taxes of $ 28.9 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 11.4 % for the six months ended September 30, 2022 was due primarily to tax expense of $ 22.6 related to the geographic mix of earnings, tax expense of $ 6.0 from employee stock-based compensation, nondeductible expense of $ 8.2 related to the settlement of convertible debt, offset by benefits of $ 30.9 from tax credits.

The benefit from income taxes for the three months ended December 31, 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The benefit from income taxes was $ 46.7 for the three months ended December 31, 2022, as compared to the provision for income taxes of $ 7.6 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 23.3 % for the three months ended December 31, 2022 was due primarily to tax benefits of $ 2.4 related to geographic mix of earnings, tax benefits of $ 1.0 from tax credits, and tax expense of $ 0.5 from employee stock-based compensation.

The benefit from income taxes for the nine months ended December 31, 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The benefit from income taxes was $ 93.1 for the nine months ended December 31, 2022, as compared to the provision for income taxes of $ 36.5 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 15.3 % for the nine months ended December 31, 2022 was due primarily to tax expense of $ 20.3 related to geographic mix of earnings, tax expense of $ 6.5 from employee stock-based compensation, nondeductible expense of $ 10.0 related to the settlement of convertible debt, offset by benefits of $ 31.9 from tax credits.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) requires taxpayers to capitalize and amortize research and development costs pursuant to Internal Revenue Code ("IRC") Section 174.

Although Congress is considering legislation that would defer the capitalization and amortization requirement to later years, we have no assurance that the requirement will be repealed or otherwise modified.

The requirement was effective for the Company beginning April 1, 2022.

For the six months ended September 30, 2022, we recorded an estimated increase to income tax payable and deferred tax assets of approximately $ 70.0 due to Section 174 capitalization.

For the nine months ended December 31, 2022, we recorded an estimated increase to income tax payable and deferred tax assets of approximately $ 70.0 due to Section 174 capitalization.

The actual impact of Section 174 capitalization and amortization on the income tax payable and deferred tax asset will depend on multiple factors, including the amount of research and development expenses we will incur and whether we conduct our research and development activities inside or outside the United States.

If legislation is not passed to defer, repeal, or otherwise modify the capitalization and amortization requirement we expect our cash taxes payable and deferred tax assets to increase in the future.

In August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which includes a 15% book-income alternative minimum tax on corporations with average applicable financial statement income over $1 billion for any 3-year period ending with 2022 or later and a 1% excise tax on the fair market value of stock that is repurchased by publicly traded U.S.

corporations or their specified affiliates.

The alternative minimum tax and the excise tax are effective in taxable years beginning after December 31, 2022.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) includes a new corporate alternative minimum tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period.

The CAMT is effective for taxable year ending March 31, 2024.

It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income.

We will continue to evaluate the potential impact of the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.

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It is possible that settlement of audits or the expiration of the statute of limitations may have an impact on our effective tax rate in future periods.

Zynga Acquisition

On May 23, 2022, we completed our acquisition of 100 % of the issued and outstanding shares of Zynga, a leading developer of mobile games (the "Zynga Acquisition").

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The cash portion of the merger consideration was funded from our cash on hand, including the proceeds from our senior notes offering.

Transaction costs of $ 18.3 , $ 1.6 , and $ 1.2 for the three months ended September 30, 2022 have been recorded within General and administrative expense, Research and development, and Selling and marketing, respectively, in our Condensed Consolidated Statements of Operations.

Transaction costs of $ 123.1 , $ 9.9 , and $ 6.8 for the six months ended September 30, 2022 have been recorded within General and administrative expense, Research and development, and Selling and marketing, respectively, in our Condensed Consolidated Statements of Operations.

Transaction costs of $ 5.6 , $ 4.1 , and $ 1.2 for the three months ended December 31, 2022 have been recorded within General and administrative expense, Research and development, and Selling and marketing, respectively, in our Condensed Consolidated Statements of Operations.

Transaction costs of $ 128.7 , $ 14.0 , and $ 8.0 for the nine months ended December 31, 2022 have been recorded within General and administrative expense, Research and development, and Selling and marketing, respectively, in our Condensed Consolidated Statements of Operations.

We acquired Zynga 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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The excess earnings methodology is an income approach methodology that estimates the projected cash flows of the business attributable to the Developed game technology, Advertising technology, and Game engine technology intangible assets, respectively, net of charges for the use of other identifiable assets of the business including working capital, fixed assets and other intangible assets.

The amortization for these intangible assets have been recorded to Cost of revenue in our Condensed Consolidated Statements of Operations .

The amortization for these intangible assets has been recorded to Cost of revenue in our Condensed Consolidated Statements of Operations .

The preliminary fair value estimate of Branding and trade names was estimated using the relief-from-royalty method, which presumes the owner of the asset avoids hypothetical royalty payments that would need to be made for the use of the asset if the asset was not owned.

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The portion of the fair value related to pre-combination services of $ 151.7 was included in the purchase price, and $ 28.6 was recognized as day-one post-combination expense for acceleration of awards, while the remaining fair value will be recognized over the remaining service periods.

As of September 30, 2022, the future expense for the Converted RSU and PSU Awards was approximately $ 325.3 , which will be recognized over a weighted average service period of approximately 1.6 years.

As of September 30, 2022, the future expense for the Converted Options was approximately $ 1.7 , which will be recognized over a weighted average service period of approximately 0.8 years.

As of December 31, 2022, the future expense for the Converted RSU and PSU Awards was approximately $ 273.7 , which will be recognized over a weighted average service period of approximately 1.5 years.

As of December 31, 2022, the future expense for the Converted Options was approximately $ 1.3 , which will be recognized over a weighted average service period of approximately 0.7 years.

Zynga Revenue and Earnings

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

Three Months Ended September 30, 2022 Six Months Ended September 30, 2022

Three Months Ended December 31, 2022 Nine Months Ended December 31, 2022

Net revenue $ 631.1 1,547.2

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Pro-forma Financial Information

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the three and six months ended September 30, 2022 and 2021, as though the acquisition had occurred on April 1, 2021, the beginning of fiscal year 2022, and Zynga had been included in our consolidated results for the entire periods subsequent to that date.

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

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

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

2022 2021 2022 2021

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The unaudited pro-forma information for all periods presented includes the following adjustments, where applicable, for business combination accounting effects resulting from the acquisition:

(i) alignment of revenue accounting policy regarding the timing of recognition of consumable and durable virtual items, (ii) additional interest expense related to financing for the acquisition, (iii) additional incremental stock-based compensation expense for the replacement of Zynga’s outstanding equity awards with Take-Two replacement equity awards, (iv) alignment of Zynga's accounting policy with Take-Two’s policy to expense certain royalty prepayments until technological feasibility is established, (v) additional lease expense resulting from the fair value adjustments to the operating lease liabilities and operating lease assets, (vi) additional amortization expense related to finite-lived intangible assets acquired, and (vii) the related tax effects assuming that the business combination occurred on April 1, 2021.

(i) alignment of Zynga's accounting policy with Take-Two’s revenue accounting policy regarding the timing of recognition of consumable and durable virtual items, (ii) additional interest expense related to financing for the acquisition, (iii) additional incremental stock-based compensation expense for the replacement of Zynga’s outstanding equity awards with Take-Two replacement equity awards, (iv) alignment of Zynga's accounting policy with Take-Two’s policy to expense certain royalty prepayments until technological feasibility is established, (v) additional amortization expense related to finite-lived intangible assets acquired, and (vi) the related tax effects assuming that the business combination occurred on April 1, 2021.

The significant nonrecurring adjustments reflected in the unaudited pro-forma consolidated information above include the reclassification of the transaction costs and the related tax effects incurred after the acquisition to the earliest period presented.

Popcore Acquisition

On November 16, 2022, we completed the acquisition of 100 % of Popcore GmbH ("Popcore"), a privately-held Germany-based free-to-play mobile game developer, for initial consideration of $ 116.9 in cash, 0.6 shares of our common stock, and a contingent earn-out consideration arrangement that requires us to pay up to an aggregate of $ 105.0 in cash if Popcore achieves certain performance measures over each of the three calendar years following the closing.

The cash portion was funded from our cash on hand.

We acquired Popcore 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 $ 199.2 , which consisted of the following:

Fair value of purchase consideration

Common stock ( 0.6 shares)

Contingent earn-out 24.5

Total $ 199.2

The fair value of the contingent earn-out consideration arrangement at the acquisition date was $ 24.5 .

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 .)

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 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, as 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 Popcore:

Fair Value Weighted average useful life

Cash acquired $ 32.5 N/A

Other tangible assets 38.0 N/A

Other liabilities assumed ( 91.0 ) N/A

Intangible Assets

Developed game technology 119.8 5

Game engine technology 28.5 7

Branding and trade names 3.5 4

Goodwill 67.9 N/A

Total $ 199.2

Goodwill, which is not deductible for U.S.

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 Popcore included in our Condensed Consolidated Statement of Operations from the acquisition date are as follows:

Three and Nine Months Ended December 31, 2022

Net revenue $ 22.5

Net loss $ 4.1

Supplemental pro-forma financial information has not been provided as the historical results of Popcore were not material to us.

Transaction costs of $ 1.3 for the three months ended December 31, 2022 have been recorded within General and administrative expense in our Condensed Consolidated Statements of Operations.

Transaction costs of $ 1.7 for the nine months ended December 31, 2022 have been recorded within General and administrative expense in our Condensed Consolidated Statements of Operations.

GOODWILL AND INTANGIBLE ASSETS, NET

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Acquisition of Zynga (see Note 14 )

Acquisition of Popcore (see Note 14 )

Additions from immaterial acquisitions 27.5

Currency translation adjustment ( 11.5 )

Balance at September 30, 2022 $ 6,871.5

Balance at December 31, 2022 $ 6,788.2

The following table sets forth the intangible assets that are subject to amortization:

September 30, 2022

December 31, 2022

Amount Accumulated

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Amortization of intangible assets is included in our Condensed Consolidated Statements of Operations as follows:

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

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

2022 2021 2022 2021

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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-Q

Item 1. Financial Statements