What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-02-07 · 175 added, 520 removed, 479 unchanged (59% of the section changed)

3 unchanged sentences

(in millions, except per share amounts)

December 31, 2022 March 31, 2022

June 30, 2023 March 31, 2023

Current assets:

2 unchanged sentences

Restricted cash and cash equivalents 381.3 307.6

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

Accounts receivable, net of allowances of $ 1.2 and $ 1.3 at June 30, 2023 and March 31, 2023, respectively

Software development costs and licenses 34.4 65.9

17 unchanged sentences

Lease liabilities 60.6 60.2

Short-term debt 350.0 —

Short-term debt, net 372.1 1,346.8

Total current liabilities 2,738.0 3,851.6

9 unchanged sentences

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

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

no shares issued and outstanding at June 30, 2023 and March 31, 2023

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

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

193.5 and 192.6 shares issued and 169.8 and 168.9 outstanding at June 30, 2023 and March 31, 2023, respectively

Additional paid-in capital 9,087.0 9,010.2

Treasury stock, at cost;

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

23.7 and 23.7 common shares at June 30, 2023 and March 31, 2023, respectively

( 1,020.6 ) ( 1,020.6 )

7 unchanged sentences

(in millions, except per share amounts)

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

2022 2021 2022 2021

Three Months Ended June 30,

Game $ 1,096.1 $ 1,019.2

8 unchanged sentences

Total operating expenses 883.5 704.1

(Loss) income from operations ( 172.9 ) 154.1 ( 462.8 ) 344.7

Loss from operations ( 204.3 ) ( 37.4 )

Interest and other, net ( 25.4 ) ( 29.3 )

Gain (loss) on fair value adjustments, net 0.8 ( 39.6 )

(Loss) income before income taxes ( 200.1 ) 152.2 ( 607.5 ) 343.6

(Benefit from) provision for income taxes ( 46.7 ) 7.6 ( 93.1 ) 36.5

Net (loss) income $ ( 153.4 ) $ 144.6 $ ( 514.4 ) $ 307.1

Earnings (loss) per share:

Basic (loss) earnings per share $ ( 0.91 ) $ 1.25 $ ( 3.27 ) $ 2.66

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

Loss before income taxes ( 228.9 ) ( 106.3 )

Benefit from income taxes 22.9 2.3

Net loss $ ( 206.0 ) $ ( 104.0 )

Loss per share:

Basic and diluted loss per share $ ( 1.22 ) $ ( 0.76 )

See accompanying Notes.

TAKE-TWO INTERACTIVE SOFTWARE, INC.

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(in millions)

Three Months Ended

December 31, Nine Months Ended December 31,

2022 2021 2022 2021

Net (loss) income $ ( 153.4 ) $ 144.6 $ ( 514.4 ) $ 307.1

Other comprehensive (loss) income:

Net loss $ ( 206.0 ) $ ( 104.0 )

Other comprehensive income (loss):

Foreign currency translation adjustment 26.0 ( 62.8 )

1 unchanged sentence

Other comprehensive income (loss) 26.9 ( 63.2 )

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

Comprehensive loss $ ( 179.1 ) $ ( 167.2 )

See accompanying Notes.

2 unchanged sentences

(in millions)

Nine Months Ended December 31,

Three Months Ended June 30,

Operating activities:

Net (loss) income $ ( 514.4 ) $ 307.1

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net loss $ ( 206.0 ) $ ( 104.0 )

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

Amortization and impairment of software development costs and licenses 69.0 47.5

3 unchanged sentences

Depreciation 31.5 17.5

Amortization of debt issuance costs 12.3 —

Interest expense 36.8 29.3

(Gain)/loss on debt extinguishment ( 7.0 ) —

Fair value adjustments ( 0.8 ) 39.6

10 unchanged sentences

Sale and maturities of available-for-sale securities 78.0 242.8

Purchases of available-for-sale securities — ( 632.5 )

Purchases of fixed assets ( 31.5 ) ( 42.5 )

Proceeds from sale of long-term investment 20.6 —

Purchases of long-term investments ( 5.0 ) ( 5.1 )

1 unchanged sentence

Other ( 2.6 ) —

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

Net cash provided by (used in) investing activities 38.1 ( 2,807.3 )

Financing activities:

5 unchanged sentences

Repayment of debt ( 989.6 ) —

Settlement of capped calls 140.1 —

Loan repayment — ( 0.2 )

Repurchase of common stock — ( 200.0 )

Payment of contingent earn-out consideration ( 0.5 ) —

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

Net cash (used in) provided by financing activities ( 20.8 ) 2,017.0

Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash and cash equivalents 3.8 ( 14.7 )

9 unchanged sentences

(in millions)

Three Months Ended December 31, 2022

Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive Income (Loss) Total Stockholder's Equity

Shares Amount Shares Amount

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 tax — — — — — — 1.4 1.4

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

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

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

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

Three Months Ended June 30, 2023

Common Stock Additional

1 unchanged sentence

Earnings Accumulated

Comprehensive

Income (Loss) Total Stockholder's Equity

Comprehensive Loss Total Stockholder's Equity

Shares Amount Shares Amount

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

Balance, March 31, 2023 192.6 $ 1.9 $ 9,010.2 ( 23.7 ) $ ( 1,020.6 ) $ 1,164.3 $ ( 113.3 ) $ 9,042.5

Net loss — — — — — ( 206.0 ) — ( 206.0 )

Change in cumulative foreign currency translation adjustment — — — — — — 26.0 26.0

4 unchanged sentences

Employee share purchase plan settlement 0.2 — 18.5 — — — — 18.5

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.

Nine Months Ended December 31, 2022

Exercise of stock options — — 0.2 — — — — 0.2

Balance, June 30, 2023 193.5 $ 1.9 $ 9,087.0 ( 23.7 ) $ ( 1,020.6 ) $ 958.3 $ ( 86.4 ) $ 8,940.2

Three Months Ended June 30, 2022

Common Stock Additional

2 unchanged sentences

Comprehensive

Income (Loss) Total

Stockholders'

Loss Total Stockholder's Equity

Shares Amount Shares Amount

2 unchanged sentences

Change in cumulative foreign currency translation adjustment — — — — — — ( 62.8 ) ( 62.8 )

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — 1.5 1.5

Net unrealized loss on available-for-sale securities, net of taxes — — — — — — ( 0.4 ) ( 0.4 )

Stock-based compensation — — 61.3 — — — — 61.3

Issuance of restricted stock, net of forfeitures and cancellations 1.2 — — — — — — —

Exercise of stock options 0.9 — 42.9 — — — — 42.9

Net share settlement of restricted stock awards ( 0.4 ) — ( 53.9 ) — — — — ( 53.9 )

1 unchanged sentence

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 — — 143.6 — — — — 143.6

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

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

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders'

Shares Amount Shares Amount

Balance, March 31, 2021 137.6 $ 1.4 $ 2,288.8 ( 22.4 ) $ ( 820.6 ) $ 1,871.0 $ ( 8.7 ) $ 3,331.9

Net income — — — — — 307.1 — 307.1

Change in cumulative foreign currency translation adjustment — — — — — — ( 24.1 ) ( 24.1 )

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 1.8 ) ( 1.8 )

Stock-based compensation — — 198.0 — — — — 198.0

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

Issuance of restricted stock, net of forfeitures and cancellations 1.1 — — — — — — —

Net share settlement of restricted stock awards ( 0.3 ) — ( 59.1 ) — — — — ( 59.1 )

Employee share purchase plan settlement 0.2 — 19.6 — — — — 19.6

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

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

Issuance of shares for conversion of Convertible Notes 3.7 — 479.7 — — — — 479.7

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

See accompanying Notes.

7 unchanged sentences

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

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.

Our products are designed for console gaming systems, PC, and mobile, including smartphones and tablets.

We deliver our products through physical retail, digital download, online platforms, and cloud streaming services.

Acquisition of Zynga

On May 23, 2022, we completed our acquisition of Zynga Inc.

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

On May 23, 2022, we completed our acquisition of 100 % of the issued and outstanding shares of Zynga Inc.

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

Refer to Note 1 3 - Acquisitions for additional information.

6 unchanged sentences

As permitted under U.S.

GAAP, interim accounting for certain expenses, including income taxes, are based on full year assumptions when appropriate.

Actual results could differ materially from those estimates, including as a result of the COVID-19 pandemic, which may affect economic conditions in a number of different ways and result in uncertainty and risk.

GAAP, interim accounting for certain expenses, including income taxes, is based on full year assumptions when appropriate.

Actual results could differ materially from those estimates, which may affect economic conditions in a number of different ways and result in uncertainty and risk.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

2 unchanged sentences

Certain immaterial reclassifications have been made to prior period amounts to conform to the current period presentation.

We are reiterating our significant accounting policy on revenue recognition included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, including certain revenue policies applied upon the close of the Zynga acquisition.

Revenue Recognition

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.

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.

We may also sell separate downloadable add-on content to supplement our full game software products.

Certain of our software products provide customers with the option to acquire virtual currency or make in-game purchases.

We determine revenue recognition by:

• identifying the contract, or contracts, with the customer;

• identifying the performance obligations in the contract;

• determining the transaction price;

• allocating the transaction price to performance obligations in the contract;

• recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the sales of software products and game related services when control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied.

Revenue is recorded net of transaction taxes assessed by governmental authorities such as sales, value-added and other similar taxes.

Our software products are sold as full games, which typically provide access to the main game content, primarily for console and PC.

Generally, our full game software products deliver a license of our intellectual property that provides a functional offline gaming experience (i.e., one that does not require an Internet connection to access the main game content or other significant game related services).

We recognize revenue related to the license of our intellectual property that provides offline functionality at the time control of the products has been transferred to our customers (i.e.

upon delivery of the software product).

In addition, some of our full game software products that provide a functional offline gaming experience may also include significant game related services delivered over time, such as online functionality that is dependent upon online support services and/or additional free content updates.

For full game sales that offer offline functionality and significant game related services we evaluate whether the license of our intellectual property and the game related services are distinct and separable.

This evaluation is performed for each software product sold.

If we determine that our software products contain a license of intellectual property separate from the game related services (i.e.

multiple performance obligations), we estimate a standalone selling price for each identified performance obligation.

We allocate the transaction price to each performance obligation using a relative standalone selling price method (the transaction price is allocated to a performance obligation based on the proportion of the standalone selling price of each performance obligation to the sum of the standalone selling prices for all performance obligations in the contract).

For the portion of the transaction price allocable to the license, revenue is recognized when the customer takes control of the product.

For the portion of the transaction price allocated to game related services, revenue is recognized ratably over an estimated service period for the related software product.

We also defer related product costs and recognize the costs as the revenues are recognized.

Certain of our full game software products are delivered primarily as an online gaming experience with substantially all gameplay requiring online access to our game related services.

We recognize revenue for full game software products that are dependent on our game related services over an estimated service period.

For our full game online software products, we also defer related product costs and recognize the costs as the revenue is recognized.

We also sell separate downloadable add-on content to supplement our full game software products.

Revenue from the sale of separate downloadable add-on content is evaluated for revenue recognition on the same basis as our full game software products.

In addition to sales of our full game software products, we also offer free-to-play software products, both of which may provide customers with the option to acquire virtual currency or make in-game purchases.

For virtual currency and in-game purchases the satisfaction of our performance obligation is dependent on the nature of the virtual item purchased and as a result, we categorize our virtual items as follows:

• Consumable:

Consumable virtual items represent items that can be consumed by a specific player action.

Consumable virtual items do not result in a direct benefit that the player keeps or provide the player any continuing benefit following consumption, and they often enable a player to perform an in-game action immediately.

For the sale of consumable virtual items, we recognize revenue as the items are consumed (i.e., over time), which approximates less than one month.

Durable virtual items represent items that are accessible to the player over an extended period of time.

We recognize revenue from the sale of durable virtual items ratably over the estimated service period for the applicable game (i.e., over time), which represents our best estimate of the average life of the durable virtual item.

Certain software products are sold to customers with a “street date” (the earliest date these products may be sold by these retailers).

For the transaction price related to the license for these products that also provide a functional offline gaming experience, we recognize revenue on the later of the street date or the sale date as this is generally when we have transferred control of this performance obligation.

For the sale of physical software products, recognition of revenue allocated to game related services does not begin until the product is sold-through by our customer to the end user.

We currently estimate sell-through to the end user for all our titles to be approximately two months after we have sold-in the software products to retailers.

Determining the estimated sell-through period requires management judgment and estimates.

In addition, some of our software products are sold as digital downloads.

Revenue from digital downloads generally commences when the download is made available to the end user by a third-party digital storefront.

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 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.

We have contractual relationships with advertising networks, agencies, advertising brokers, and directly with advertisers to display advertisements in our games.

For our in-game advertising arrangements, our performance obligation is to provide the inventory for advertisements to be displayed in our games.

For contracts made directly with advertisers, we are also obligated to serve the advertisements in our games.

However, for those direct advertising arrangements, providing the advertising inventory and serving the advertisement is considered a single performance obligation, as the advertiser cannot benefit from the advertising space without its advertisements being displayed.

For in-game display advertisements, in-game offers, engagement advertisements, and other advertisements, our performance obligation is satisfied over the life of the contract, with revenue being recognized as advertising units are delivered.

Contract Balances

We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue when cash payments are received or due in advance of satisfying our performance obligations, even if amounts are refundable.

Contract assets generally consist of arrangements for which we have recognized revenue to the extent it is probable that significant reversal will not occur but do not have a right to invoice as of the reporting date.

Our allowances for doubtful accounts are typically immaterial and, if required, are based on our best estimate of expected credit losses inherent in our accounts receivable balance.

Deferred revenue is comprised primarily of unsatisfied revenue related to the portion of the transaction price allocable to game related services of our full game software products and sales of virtual currency.

These sales are typically invoiced at the beginning of the contract period, and revenue is recognized ratably over the estimated service period.

Deferred revenue may also include amounts related to software products with future street dates.

Refer to Note 2 - Revenue from Contracts with Customers for further information, including changes in deferred revenue during the period.

Principal Agent Considerations

We offer certain software products via third-party digital storefronts, such as Microsoft’s Xbox Live, Sony’s PlayStation Network, Valve's Steam, Epic Games Store, Apple's App Store, and the Google Play Store.

For sales of our software products via third-party digital storefronts, we determine whether or not we are acting as the principal in the sale to the end user, which we consider in determining if revenue should be reported based on the gross transaction price to the end user or based on the transaction price net of fees retained by the third-party digital storefront.

An entity is the principal if it controls a good or service before it is transferred to the customer.

Key indicators that we use in evaluating these sales transactions include, but are not limited to, the following:

• the underlying contract terms and conditions between the various parties to the transaction;

• which party is primarily responsible for fulfilling the promise to provide the specified good or service;

• which party has discretion in establishing the price for the specified good or service.

Based on our evaluation of the above indicators, for sales arrangements via Microsoft’s Xbox Live, Sony’s PlayStation Network, Valve's Steam, and Epic Games Store we have determined we are not the principal in the sales transaction to the end user and therefore we report revenue based on the consideration received from the digital storefront.

For sales arrangements via Apple's App Store and the Google Play Store, we have determined that we are the principal to the end user and thus report revenue on a gross basis and mobile platform fees charged by these digital storefronts are expensed as incurred and reported within Cost of revenue.

Shipping and Handling

Shipping and handling costs are incurred to move physical software products to customers.

We recognize all shipping and handling costs as an expense in Cost of revenue because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Estimated Service Period

For certain performance obligations satisfied over time, we have determined that the estimated service period is the time period in which an average user plays our software products (“user life”) which most faithfully depicts the timing of satisfying our performance obligation.

We consider a variety of data points when determining and subsequently reassessing the estimated service period for players of our software products.

Primarily, we review the weighted average number of days between players’ first and last days played online.

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.

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

Future usage patterns may differ from historical usage patterns, and therefore the estimated service period may change in the future.

The estimated service periods for players of our current software products are generally between six and fifteen months depending on the software product.

Revenue Arrangements with Multiple Performance Obligations

Our contracts with customers often include promises to transfer multiple products and services.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together requires significant judgment.

For software products in which the software license has offline functionality and benefits from meaningful game related services, which may include online functionality that is dependent on our online support services and/or additional free content updates, we believe we have separate performance obligations for the license of the intellectual property and the game related services.

Additionally, because each of our product offerings has unique features and because we do not sell our game related services separately, we typically do not have observable standalone selling prices for each performance obligation.

Significant judgment and estimates are also required to determine the standalone selling price for each distinct performance obligation and whether a discount needs to be allocated based on the relative standalone selling price of our products and services.

To estimate the standalone selling price for each performance obligation, we consider, to the extent available, a variety of data points such as past selling prices of the product or other similar products, competitor pricing, and market data.

If observable pricing is not available, we use an expected cost-plus margin approach taking into account relevant costs including product development, post-release support, marketing and licensing costs.

This evaluation is performed on a product by product basis.

Price Protection, Allowances for Returns, and Sales Incentives

We grant price protection and accept returns in connection with our distribution arrangements.

Following reductions in the price of our physical software products, we grant price protection to permit customers to take credits against amounts they owe us with respect to merchandise unsold by them.

Our customers must satisfy certain conditions to entitle them to receive price protection or return products, including compliance with applicable payment terms and confirmation of field inventory levels.

At contract inception and at each subsequent reporting period, we make estimates of price protection and product returns related to current period software product revenue.

We estimate the amount of price protection and returns for software products based upon, among other factors, historical experience and performance of the titles in similar genres, historical performance of the hardware platform, customer inventory levels, analysis of sell-through rates, sales force and retail customer feedback, industry pricing, market conditions, and changes in demand and acceptance of our products by consumers.

We enter into various sales incentive arrangements with our customers, such as rebates, discounts, and cooperative marketing.

These incentives are considered adjustments to the transaction price of our software products and are reflected as reductions to revenue.

Sales incentives incurred by us for distinct goods or services received, such as the appearance of our products in a customer’s national circular ad, are included in Selling and marketing expense if there is a separate identifiable benefit and the benefit’s fair value can be established.

Otherwise, such sales incentives are reflected as a reduction to revenue.

Revenue is recognized after deducting the estimated price protection, allowances for returns, and sales incentives, which are accounted for as variable consideration.

Price protection, allowances for returns, and sales incentives are considered refund liabilities and are reported within Accrued expenses and other current liabilities on our Consolidated Balance Sheet.

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, and the amounts of price protection.

We believe we can make reliable estimates.

However, actual results may differ from initial estimates due to changes in circumstances, market conditions, and assumptions.

Adjustments to estimates are recorded in the period in which they become known.

Payment Terms

Our payment terms and conditions vary by customer and typically provide net 30- to 60-day terms.

In instances where the timing of revenue recognition differs from the timing of invoicing, we do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less.

Recently Adopted 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.

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.

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

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.

We adopted this effective April 1, 2022.

The adoption of this update did not have an impact on our Condensed Consolidated Financial Statements and was applied to our acquisition of Zynga.

Refer to Note 14 - Acquisitions .

Accounting for Convertible Debt

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) , which simplifies the accounting for convertible instruments by reducing the number of accounting models and generally requiring that a convertible instrument be accounted for as a single liability measured at amortized cost, with no conversion feature separately recorded in equity.

Similarly, no portion of issuance costs will be allocated to equity under the ASU.

Further, the ASU amends the earnings per share guidance by requiring the diluted earnings per share calculation for convertible instruments to follow the if-converted method, with use of the treasury stock method no longer permitted.

We adopted this effective April 1, 2022.

The adoption of this update did not have an impact on our Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements

There were no new accounting pronouncements issued or effective as of June 30, 2023, that had, or are expected to have, a material impact on our Condensed Consolidated Financial Statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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Net revenue by timing of recognition was as follows:

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

2022 2021 2022 2021

Three Months Ended June 30,

Net revenue recognized:

2 unchanged sentences

Total net revenue $ 1,284.7 $ 1,102.4

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

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

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

Net revenue by content was as follows:

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

2022 2021 2022 2021

Three Months Ended June 30,

Net revenue recognized:

4 unchanged sentences

Net revenue by geographic region was as follows:

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

2022 2021 2022 2021

Three Months Ended June 30,

Net revenue recognized:

3 unchanged sentences

Net revenue by platform was as follows:

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

2022 2021 2022 2021

Three Months Ended June 30,

Net revenue recognized:

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Net revenue by distribution channel was as follows:

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

2022 2021 2022 2021

Three Months Ended June 30,

Net revenue recognized:

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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 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.

The balance of deferred revenue, including current and non-current balances as of June 30, 2023 and March 31, 2023 were $ 1,027.0 and $ 1,114.3 , respectively.

For the three months ended June 30, 2023, the additions to our deferred revenue balance were due primarily to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were due primarily to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the three months ended June 30, 2023 and 2022, $ 523.9 and $ 439.7 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of June 30, 2023, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,232.2 , which includes our deferred revenue balances and amounts to be invoiced and recognized as revenue in future periods.

We expect to recognize approximately $ 1,158.7 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 December 31, 2022 and March 31, 2022, our contract asset balances were $ 84.4 and $ 104.9 , respectively.

As of June 30, 2023 and March 31, 2023, our contract asset balances were $ 79.9 and $ 79.9 , respectively.

MANAGEMENT AGREEMENT

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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 $( 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 consideration for ZMC's services, we recorded consulting expense in General and administrative expenses on our Condensed Consolidated Statements of Operations of $ 2.8 and $ 2.7 during the three months ended June 30, 2023 and 2022, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZMC, which is also included in General and administrative expenses, of $ 11.2 and $ 8.5 during the three months ended June 30, 2023 and 2022, respectively.

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

Nine Months Ended December 31,

Three Months Ended June 30,

Time-based 97 192

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Performance-based (1)

Recurrent Consumer Spending ("RCS") 153 16

Total Performance-based 98 171

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(1) Represents the maximum of shares eligible to vest

Time-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement will vest on April 13, 2024, and those granted in fiscal year 2022 will vest on April 13, 2023.

Time-based restricted stock units granted in fiscal year 2023 pursuant to the 2022 Management Agreement will vest on June 1, 2023, June 1, 2024, and June 1, 2025.

Market-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement are eligible to vest on April 13, 2024, and those granted in fiscal year 2022 are eligible to vest on April 13, 2023.

Market-based restricted stock units granted in fiscal year 2023 pursuant to the 2022 Management Agreement are eligible to vest on June 1, 2024 and June 1, 2025.

Time-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2024 will vest on June 1, 2024, June 1, 2025, and June 1, 2026, and those granted in fiscal year 2023, partially vested on June 1, 2023 and will also vest June 1, 2024, and June 1, 2025.

Time-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement will vest on April 13, 2024.

Market-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2024 are eligible to vest on June 1, 2026, and those granted in fiscal year 2023 are eligible to vest on June 1, 2024 and June 1, 2025.

Market-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement are eligible to vest on April 13, 2024.

Market-based restricted stock units are eligible to vest based on the Company's 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 either the NASDAQ Composite Index under the 2017 Management Agreement or the NASDAQ 100 index under the 2022 Management Agreement (as defined in the relevant grant agreement) as of the grant date measured over a two-year period or three-year period, as applicable.

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 50 th percentile, with the maximum number of market-based restricted stock units earned if the Company performs at the 75 th percentile.

Performance-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement are eligible to vest on April 13, 2024, and those granted in fiscal year 2022 are eligible to vest on April 13, 2023.

Performance-based restricted stock units granted in fiscal year 2023 pursuant to the 2022 Management Agreement are eligible to vest on June 1, 2024 and June 1, 2025.

Performance-based restricted stock units granted pursuant to the 2022 Management Agreement in fiscal year 2024 are eligible to vest on June 1, 2026, and those granted in fiscal year 2023 are eligible to vest on June 1, 2024 and June 1, 2025.

Performance-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement are eligible to vest on April 13, 2024.

The performance-based restricted stock units, of which certain are tied to "IP" and "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" measured over a two-year period or "RCS" measured over a three-year period.

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

The unvested portion of time-based, market-based and performance-based restricted stock units held by 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.

The unvested portions of time-based, market-based and performance-based restricted stock units held by ZMC were 1.3 and 1.1 as of June 30, 2023 and March 31, 2023, respectively.

During the three months ended June 30, 2023, 0.2 restricted stock units previously granted to ZMC vested, and 0.0 restricted stock units were forfeited by ZMC.

FAIR VALUE MEASUREMENTS

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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.

December 31, 2022

June 30, 2023

Quoted prices

8 unchanged sentences

Bank-time deposits 40.9 — — 40.9

Commercial paper — 2.7 — 2.7

Restricted cash and cash equivalents:

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Contingent earn-out consideration — — 21.5 21.5

Short-term debt, net:

Convertible notes — 22.1 — 22.1

Long-term debt, net:

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Cash and cash equivalents:

Bank-time deposits $ 636.0 $ — $ — $ 636.0

Money market funds $ 368.0 $ — $ — $ 368.0

Commercial paper — 119.4 — 119.4

US Treasuries 52.0 — — 52.0

Certificates of Deposit — 10.0 — 10.0

Corporate bonds — 2.8 — 2.8

Restricted cash and cash equivalents:

Money market funds 356.8 — — 356.8

Bank-time deposits 145.8 — — 145.8

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Bank-time deposits 41.8 — — 41.8

Commercial paper — 125.4 — 125.4

US Treasuries 23.4 — — 23.4

Certificates of Deposit — 1.0 — 1.0

Other assets:

Private equity — — 16.1 16.1

Restricted cash and cash equivalents:

Money market funds 306.1 — — 306.1

Bank-time deposits 0.5 — — 0.5

Restricted cash and cash equivalents, long term:

Money market funds 99.6 — — 99.6

Other assets:

Private equity — — 26.5 26.5

Total financial assets $ 961.8 $ 145.2 $ 26.5 $ 1,133.5

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Contingent earn-out consideration — — 27.3 27.3

Long-term debt, net:

Convertible notes — 44.1 — 44.1

Total financial liabilities $ — $ 46.6 $ 93.9 $ 140.5

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.

We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the three months ended June 30, 2023.

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.

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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 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.

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.

During the three months ended June 30, 2023, we recognized General and administrative expense of $ 4.5 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 $ 69.5 and is recorded within Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheet as of June 30, 2023.

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

In connection with our acquisition of Popcore GmbH ("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 $ 23.3 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.

During the three months ended June 30, 2023, we recognized General and administrative expense of $ 9.6 within our Condensed Consolidated Statements of Operations for the increase in fair value of the contingent earn-out consideration liability associated with the Popcore acquisition, which increased the fair value of the contingent consideration liability related to the earn-out period to $ 35.2 , with $ 15.4 and $ 19.8 being recorded within Accrued expenses and other current liabilities and Other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheet as of June 30, 2023.

The increase resulted from a higher probability of Popcore achieving certain performance measures in all three 12 -month periods.

The remaining contingent earn-out consideration liability of $ 1.7 and $ 1.7 recorded within Accrued expenses and other current liabilities and Other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheet as of June 30, 2023 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.

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

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.

At June 30, 2023, and March 31, 2023, we held $ 8.0 and $ 8.0 , respectively, of such investments in Other assets within our Condensed Consolidated Balance Sheet.

SHORT-TERM INVESTMENTS

Our Short-term investments consisted of the following:

December 31, 2022

June 30, 2023

Amortized Cost Gains Losses Fair Value

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Corporate bonds 69.0 — ( 0.7 ) 68.3

Commercial paper 2.7 — — 2.7

Total Short-term investments $ 109.9 $ — $ ( 0.7 ) $ 109.2

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Corporate bonds 147.2 — ( 2.0 ) 145.2

US Treasuries 23.4 — — 23.4

Commercial Paper 125.4 — — 125.4

Certificates of Deposit 1.0 — — 1.0

Total Short-term investments $ 189.0 $ — $ ( 2.0 ) $ 187.0

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

December 31, 2022

The following table summarizes the contracted maturities of our short-term investments at June 30, 2023:

June 30, 2023

Short-term investments

Due in 1 year or less $ 109.9 $ 109.2

Due in 1 - 2 years 2.9 2.8

Total Short-term investments $ 109.9 $ 109.2

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

December 31, 2022 March 31, 2022

June 30, 2023 March 31, 2023

Forward contracts to sell foreign currencies $ 257.3 $ 224.3

Forward contracts to purchase foreign currencies 107.0 51.2

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.

For the three months ended June 30, 2023 and 2022, we recorded a gain of $ 3.8 and a gain of $ 1.6 , respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.

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

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

December 31, 2022 March 31, 2022

June 30, 2023 March 31, 2023

Current Non-current Current Non-current

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Software development costs and licenses $ 34.4 $ 1,189.0 $ 65.9 $ 1,072.2

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.

During the three months ended June 30, 2023 and 2022, we recorded $ 18.2 and $ 19.9 , respectively, of software development impairment charges (a component of Cost of revenue).

The impairment charges recorded during the three months ended June 30, 2023 related to recognizing unamortized capitalized costs for the development of titles, 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 June 30, 2022 related to a decision not to proceed with further development of certain interactive entertainment software products.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

December 31, 2022 March 31, 2022

June 30, 2023 March 31, 2023

Software development royalties $ 539.6 $ 510.7

Compensation and benefits 151.6 177.5

Deferred acquisition payments 140.8 78.6

Marketing and promotions 123.8 132.7

Tax payable 102.4 14.1

Deferred acquisition payments 97.3 82.7

Licenses 63.4 63.0

Tax payable 46.4 33.0

Refund liability 41.2 52.4

Sales tax liability 43.2 17.2

Interest payable 21.7 —

Professional fees 8.6 17.0

Other 123.0 173.7

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

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

Annual Interest Rate Maturity Date June 30, 2023 Fair Value (Level 2)

2025 Notes 3.55 % April 14, 2025 $ 600.0 $ 578.5

2026 Notes 5.00 % March 28, 2026 500.0 495.1

2027 Notes 3.70 % April 14, 2027 600.0 567.0

2028 Notes 4.95 % March 28, 2028 500.0 493.5

2032 Notes 4.00 % April 14, 2032 500.0 457.5

2026 Convertible Notes 0.00 % December 15, 2026 23.5 23.5

Total $ 2,723.5 $ 2,615.1

Unamortized discount and issuance costs ( 18.8 )

Long-term debt, net $ 2,704.7

Annual Interest Rate Maturity Date March 31, 2023 Fair Value (Level 2)

2025 Notes 3.55 % April 14, 2025 $ 600.0 $ 583.8

2027 Notes 3.70 % April 14, 2027 600.0 580.9

2032 Notes 4.00 % April 14, 2032 500.0 460.6

2024 Convertible Notes 0.25 % June 1, 2024 20.8 20.8

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Long-term debt, net $ 1,733.0

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

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

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

Annual Interest Rate Maturity Date June 30, 2023 Fair Value (Level 2)

2024 Notes 3.30 % March 28, 2024 $ 350.0 $ 343.2

2024 Convertible Notes 0.25 % June 1, 2024 22.1 22.1

Total $ 372.1 $ 365.3

Unamortized discount and issuance costs —

Short-term debt, net $ 372.1

Annual Interest Rate Maturity Date March 31, 2023 Fair Value (Level 2)

2024 Notes 3.30 % March 28, 2024 $ 1,000.0 $ 978.2

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 nine months ended December 31, 2022 and was as follows:

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

Total $ 1,350.0 $ 1,328.2

Unamortized discount and issuance costs ( 3.2 )

Short-term debt, net $ 1,346.8

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 months ended June 30, 2023, and 2022, respectively, and was as follows:

Three Months Ended June 30, Three Months Ended June 30,

2024 Notes $ 6.5 $ 6.7

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2027 Notes 5.6 4.6

2028 Notes 5.3 —

2032 Notes 5.0 4.2

Term Loan 1.5 0.3

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Total $ 34.5 $ 20.5

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

Fiscal Year Ended March 31, Maturities

The following table outlines the aggregate amount of maturities of our borrowings, as of June 30, 2023:

Three Months Ended June 30, 2023 Maturities

2024 (remaining) $ 350.0

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Total face value $ 3,095.6

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 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.

On April 14, 2022, we completed our offering and sale of $ 2,700.0 aggregate principal amount of our senior notes, consisting of $ 1,000.0 principal amount of our 3.300 % Senior Notes due 2024 (the “2024 Notes”), $ 600.0 principal amount of our 3.550 % Senior Notes due 2025 (the “2025 Notes”), $ 600.0 principal amount of our 3.700 % Senior Notes due 2027 (the “2027 Notes”), and $ 500.0 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 “Senior Notes”).

The Senior Notes were issued under an indenture, dated as of April 14, 2022 (the “Base Indenture”), between the Company and The Bank of New York Mellon, as trustee (the “Trustee”) and (i) a first supplemental indenture, with respect to the 2024 Notes, (ii) a second supplemental indenture, with respect to the 2025 Notes, (iii) a third supplemental indenture, with respect to the 2027 Notes and (iv) a fourth supplemental indenture, with respect to the 2032 Notes (collectively, the “Supplemental Indentures” and together with the Base Indenture, the “Indenture”), each dated as of April 14, 2022, between the Company and the Trustee.

On April 14, 2023, we completed our offering and sale of $ 1,000.0 aggregate principal amount of our senior notes, consisting of $ 500.0 principal amount of our 5.000 % Senior Notes due 2026 (the "2026 Notes") and $ 500.0 principal amount of our 4.950 % Senior Notes due 2028 ("the 2028 Notes").

On April 14, 2022, we completed our offering and sale of 2,700.0 aggregate principal amount of our senior notes, consisting of $ 1,000.0 principal amount of our 3.300 % Senior Notes due 2024 (the “2024 Notes”), $ 600.0 principal amount of our 3.550 % Senior Notes due 2025 (the “2025 Notes”), $ 600.0 principal amount of our 3.700 % Senior Notes due 2027 (the “2027 Notes”), and $ 500.0 principal amount of our 4.000 % Senior Notes due 2032 (the “2032 Notes” and together with the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, and 2028 Notes, the "Senior Notes").

The Senior Notes were issued under an indenture, dated as of April 14, 2022 (the “Base Indenture”), between the Company and The Bank of New York Mellon, as trustee (the “Trustee”) and (i) a first supplemental indenture, with respect to the 2024 Notes, (ii) a second supplemental indenture, with respect to the 2025 Notes, (iii) a third supplemental indenture, with respect to the 2027 Notes, (iv) a fourth supplemental indenture, with respect to the 2032 Notes, (v) a fifth supplemental indenture, with respect to the 2026 Notes, and (vi) a sixth supplemental indenture, with respect to the 2028 Notes (collectively, the “Supplemental Indentures” and together with the Base Indenture, the “Indenture”), between the Company and the Trustee.

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

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

We will pay interest on the 2024 Notes, 2026 Notes, and 2028 Notes semi-annually on March 28 and September 28 of each year, commencing September 28, 2022 for the 2024 Notes and September 28, 2023 for the 2026 Notes and 2028 Notes.

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.

During the three months ended June 30, 2023, we made interest payments of $ 35.7 .

The proceeds from the issuances of the Senior Notes were used to finance a portion of our acquisition of Zynga and repay certain of our debt.

The Senior Notes are not entitled to any sinking fund payments.

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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 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.

During the three months ended June 30, 2023, and 2022, we recognized $ 1.8 and $ 1.2 , respectively, of amortization of debt issuance costs and $ 0.2 and $ 0.1 , respectively, of amortization of the original issuance discount.

On June 5, 2023, pursuant to a tender offer, we purchased and retired $ 650.0 in aggregate principal amount of our 2024 Notes, resulting in a remaining principal amount of $ 350.0 recorded within Short-term debt, net on our Condensed Consolidated Balance Sheet.

During the three months ended June 30, 2023, we recognized a debt extinguishment gain of approximately $ 7.0 , net of unamortized debt discount and debt issuance costs recorded within Interest and other, net in our Condensed Consolidated Statement of Operations.

The purchase of a portion of our 2024 Notes was funded with proceeds received from the 2026 Notes and 2028 Notes.

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 ( 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.

Loans under the 2022 Credit Agreement will bear interest at a rate of (a) 0.000 % to 0.625 % above an alternate base rate ( 8.25 % at June 30, 2023) or (b) 1.000 % to 1.625 % above Secured Overnight Financing Rate ("SOFR"), approximately 5.14 % at June 30, 2023, 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 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.

This borrowing has a maturity date of May 23, 2027.

On September 22, 2022, we repriced our outstanding borrowing at approximately 4.84 %.

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

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:

December 31, 2022 March 31, 2022

During the three months ended June 30, 2023, and 2022, we amortized $ 0.2 and $ 0.1 , respectively, of these debt issuance costs.

As of June 30, 2023, there were no borrowings under the 2022 Credit Agreement, and we had approximately $ 499.5 available for additional borrowings.

Information related to availability on our 2022 Credit Agreement for each period was as follows:

June 30, 2023 March 31, 2023

Available borrowings $ 499.5 $ 499.5

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On June 22, 2022, we entered into an unsecured 364 -Day Term Loan Credit Agreement ("Term Loan").

The Term Loan provides for an unsecured 364 -day term loan credit facility in the aggregate principal amount of $ 350.0 and matures on June 21, 2023, and will bear interest at our election at a margin of (a) 0.000 % to 0.375 % above an alternate base rate (defined on the basis of prime rate) or (b) 0.750 % to 1.375 % above SOFR, which margins are determined by reference to our credit rating.

The Term Loan constitutes senior unsecured indebtedness of the Company, ranking equally with all of our other existing and future senior unsecured unsubordinated obligations.

The Term Loan 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.

In addition, the Term Loan provides for events of default customary for a credit facility of this size and type, including, among others, non-payment of principal and interest when due thereunder, breaches of representations and warranties, noncompliance with covenants, acts of insolvency, cross-defaults to material indebtedness, and material judgment defaults (subject to certain limitations and cure periods).

The Term Loan provided for an unsecured 364 -day term loan credit facility in the aggregate principal amount of $ 350.0 , maturing on June 21, 2023.

We fully drew down on the Term Loan on June 22, 2022 at approximately 3.60 %.

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

A portion of the proceeds from the April 14, 2023 issuance of the 2026 Notes and 2028 Notes were used to fully repay the Term Loan on April 27, 2023.

Convertible Notes

In conjunction with the acquisition of Zynga on May 23, 2022 (refer to Note 1 3 - Acquisitions ), we entered into (a) the First Supplemental Indenture (the “2024 Supplemental Indenture”) to the Indenture, dated as of June 14, 2019 (the “2024 Indenture”), between Zynga and Computershare Trust Company, N.A.

(as successor to Wells Fargo Bank, National Association) (the “Trustee”), relating to Zynga’s 0.25 % Convertible Senior Notes due 2024 (the “2024 Convertible Notes”), and (b) the First Supplemental Indenture (the “2026 Supplemental Indenture” and, together with the 2024 Supplemental Indenture, the “Supplemental Indentures”) to the Indenture, dated as of December 17, 2020 (the “2026 Indenture” and, together with the 2024 Indenture, the “Indentures”), between Zynga and the Trustee, relating to Zynga’s 0 % Convertible Senior Notes due 2026 (the “2026 Convertible Notes” and, together with the 2024 Convertible Notes, the “Convertible Notes”).

As of the closing date of the acquisition, approximately $ 690.0 aggregate principal amount of the 2024 Convertible Notes were outstanding and approximately $ 874.5 aggregate principal amount of the 2026 Convertible Notes were outstanding.

(as successor to Wells Fargo Bank, National Association) (the “Convertible Notes Trustee”), relating to Zynga’s 0.25 % Convertible Senior Notes due 2024 (the “2024 Convertible Notes”), and (b) the First Supplemental Indenture (the “2026 Supplemental Indenture” and, together with the 2024 Supplemental Indenture, the “Supplemental Indentures”) to the Indenture, dated as of December 17, 2020 (the “2026 Indenture” and, together with the 2024 Indenture, the “Indentures”), between Zynga and the Convertible Notes Trustee, relating to Zynga’s 0.00 % Convertible Senior Notes due 2026 (the “2026 Convertible Notes” and, together with the 2024 Convertible Notes, the “Convertible Notes”).

As of the closing date of the acquisition, approximately $ 690.0 aggregate principal amount of the 2024 Convertible Notes was outstanding and approximately $ 874.5 aggregate principal amount of the 2026 Convertible Notes was outstanding.

Following the acquisition and according to the Supplemental Indentures, we assumed all of Zynga’s rights and obligations under the Indentures, and the Company guaranteed the payment and other obligations of Zynga under the Convertible Notes.

As a result of our acquisition of Zynga, the right to convert each one thousand dollar principal amount of such Convertible Notes into shares of Zynga common stock was changed into a right to convert such principal amount of such Convertible Notes into the number of units of Reference Property equal to the conversion rate in effect immediately prior to the closing of the Zynga Acquisition, in each case pursuant to the terms and procedures set forth in the applicable Indenture.

As a result of our acquisition of Zynga, the right to convert each one thousand dollar principal amount of such Convertible Notes into shares of Zynga common stock was changed into a right to convert such principal amount of such Convertible Notes into the number of units of Reference Property equal to the conversion rate in effect immediately prior to the closing, in each case pursuant to the terms and procedures set forth in the applicable Indenture.

A unit of Reference Property is defined in each Indenture as 0.0406 shares of Take-Two common stock and $ 3.50 in cash, without interest, plus cash in lieu of any fractional shares of Take-Two common stock.

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The acquisition of Zynga constituted a Fundamental Change, a Make-Whole Fundamental Change, and a Share Exchange Event (each as defined in the Indentures) under the Indentures.

The effective date of the Fundamental Change, Make-Whole Fundamental Change and Share Exchange Event in respect of the Convertible Notes was May 23, 2022 (the “Convertible Notes Effective Date”), and the related tender and conversion periods expired on June 22, 2022.

The effective date of the Fundamental Change, Make-Whole Fundamental Change and Share Exchange Event in respect of the Convertible Notes was May 23, 2022, and the related tender and conversion periods expired on June 22, 2022.

As a result, each holder of Convertible Notes had the right to tender its Convertible Notes to the Company for cash or surrender its Convertible Notes for conversion into the Reference Property at the applicable conversion rate, in each case pursuant to the terms and procedures set forth in the applicable Indenture.

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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 December 31, 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, its subsidiaries, and their respective 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 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.

As of June 30, 2023, 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 1 3 - 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 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.

These Capped Call options were intended to reduce the potential economic dilution of Zynga shares upon any conversion of the Convertible Notes and/or offset any cash payments made in excess of the principal amount of converted notes with such reduction and/or offset, as the case might have been, subject to a maximum based on the cap price.

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.

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

We initially recorded $ 131.3 as the acquisition date fair value of these Capped Calls, and, as of June 30, 2022, the fair value of $ 140.1 is recorded on our Condensed Consolidated Balance Sheet.

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 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.

(LOSS) EARNINGS PER SHARE ("EPS")

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

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

2022 2021 2022 2021

Computation of Basic (loss) earnings per share:

Net (loss) income $ ( 153.4 ) $ 144.6 $ ( 514.4 ) $ 307.1

Weighted average shares outstanding—basic 168.0 115.3 157.2 115.6

Basic (loss) earnings per share $ ( 0.91 ) $ 1.25 $ ( 3.27 ) $ 2.66

Computation of Diluted (loss) earnings per share:

Net (loss) income $ ( 153.4 ) $ 144.6 $ ( 514.4 ) $ 307.1

As of June 30, 2023, we recorded $ 22.1 as the fair value of the remaining outstanding 2024 Convertible Notes, within Short-term debt, net, and $ 23.5 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 June 30, 2023 and 2022, we recognized a loss of $ 1.5 and a loss of $ 47.8 , respectively, within Gain (loss) on fair value adjustments, net in our Condensed Consolidated Statements of Operations.

LOSS PER SHARE

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

Three Months Ended June 30,

Computation of Basic and diluted loss per share:

Net loss $ ( 206.0 ) $ ( 104.0 )

Weighted average shares outstanding—basic 169.4 136.5

dilutive effect of common stock equivalents — 1.4 — 1.2

Weighted average common shares outstanding—diluted 168.0 116.7 157.2 116.8

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

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 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 .

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Nine Months Ended December 31, 2022

adjustments Unrealized

gain (loss) on

available-for-

securities Total

Balance at March 31, 2022 $ ( 52.8 ) $ ( 4.5 ) $ ( 57.3 )

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

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

Nine Months Ended December 31, 2021

adjustments Unrealized

gain (loss) on

available-for-

securities Total

Balance at March 31, 2021 $ ( 9.3 ) $ 0.6 $ ( 8.7 )

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

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

Basic and diluted loss per share $ ( 1.22 ) $ ( 0.76 )

We incurred a net loss for the three months ended June 30, 2023 and 2022;

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

For the three months ended June 30, 2023, we had 1.8 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.

During the three months ended June 30, 2023, 1.0 restricted stock awards vested, we granted 2.1 unvested restricted stock awards, and 0.2 unvested restricted stock awards were forfeited.

COMMITMENTS AND CONTINGENCIES

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

Fiscal Year Ending March 31, Software

and Licensing Marketing Operating Leases Purchase

Obligations Total

2023 (remaining) $ 80.5 $ 5.8 $ 19.5 $ 165.3 $ 271.1

2024 276.8 24.9 63.1 140.0 504.8

2025 191.7 34.7 69.6 69.9 365.9

2026 122.2 92.8 52.5 27.8 295.3

2027 18.1 17.6 49.0 2.5 87.2

Thereafter 15.4 22.5 244.6 0.1 282.6

Total $ 704.7 $ 198.3 $ 498.3 $ 405.6 $ 1,806.9

Software Development and Licensing Agreements:

We make payments to third-party software developers that include contractual payments to developers under several software development agreements that expire at various times through July 2031.

Our aggregate outstanding software development commitments assume satisfactory performance by third-party software developers.

We also have licensing commitments that primarily consist of obligations to holders of intellectual property rights for use of their trademarks, copyrights, technology or other intellectual property rights in the development of our products.

Marketing Agreements:

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 March 2029 and primarily reflect our agreements with major sports leagues and players' associations.

Purchase Obligations:

These obligations are primarily related to agreements to purchase services that are enforceable and legally binding on us that specifies all significant terms, including fixed, minimum or variable pricing provisions;

and the approximate timing of the transactions, expiring at various times through March 2027.

Operating Leases:

Our offices are occupied under non-cancelable operating leases expiring at various times through December 2037.

We also lease certain furniture, equipment and automobiles under non-cancelable leases expiring through February 2026.

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

Other than agreements entered into in the ordinary course of business and in addition to the agreements requiring known cash commitments as reported in Note 14 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, we did not have any significant changes to our commitments since March 31, 2023.

Legal and Other Proceedings

We are, or may become, subject to demands and claims (including intellectual property and employment related claims) and are involved in routine litigation in the ordinary course of business which we do not believe to be material to our business or financial condition or results of operations.

We have appropriately accrued amounts

related to certain of these claims and legal and other proceedings.

We have appropriately accrued amounts related to certain of these claims and legal and other proceedings.

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 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.

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

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.

The benefit from income taxes for the three months ended June 30, 2023 is based on our projected annual effective tax rate for fiscal year 2024, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The benefit from income taxes was $ 22.9 for the three months ended June 30, 2023, as compared to the benefit from income taxes of $ 2.3 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 10.0 % for the three months ended June 30, 2023 was due primarily to tax expense of $ 25.4 related to an increase in the U.S.

valuation allowance, tax expense of $ 2.4 related to geographic mix of earnings, tax expense of $ 5.0 from employee stock-based compensation offset by benefits of $ 20.4 from tax credits.

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.

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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.

We estimate no tax liability relating to CAMT for the current fiscal year.

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

We are regularly examined by domestic and foreign taxing authorities.

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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").

On May 23, 2022, we completed the Zynga Acquisition.

Under the terms and conditions of the merger agreement, each Zynga stockholder received $ 3.50 in cash and 0.0406 shares of our common stock and cash in lieu of fractional shares for each share of Zynga common stock outstanding at closing.

Our consideration consisted of an aggregate of $ 3,992.4 in cash, 46.3 shares of our common stock, and $ 151.7 of replacement equity awards attributable to the pre-acquisition service period (see below).

Our consideration consisted of an aggregate of $ 3,992.4 in cash, 46.3 shares of our common stock, and $ 151.7 of replacement equity awards attributable to the pre-acquisition service period.

In connection with the transaction, on April 14, 2022, we completed our offering and sale of $ 2,700.0 aggregate principal amount of our Senior Notes (refer to Note 9 - Debt ).

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

As we finalize our estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months from the acquisition date).

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

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

Fair Value Weighted average useful life

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Total $ 9,521.8

Convertible Notes and Related Capped Calls

Refer to Note 9 - Debt for a discussion of the Convertible Notes and related Capped Calls that were previously issued by Zynga.

Identifiable Intangible Assets Acquired and Goodwill

The preliminary fair value estimates of Developed game technology, Game engine technology, and Advertising technology were estimated using the multi-period excess earnings method.

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 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.

The amortization for the Branding and trade names intangible asset has been recorded to Depreciation and amortization in our Condensed Consolidated Statements of Operations .

The preliminary fair value estimate of User base was estimated using the replacement cost method.

The replacement cost methodology is a cost approach methodology based on replacement or reproduction cost of the User Base as an indicator of fair value.

The amortization for the User base intangible asset has been recorded to Selling and marketing in our Condensed Consolidated Statements of Operations .

The preliminary fair value estimate of Developer relationships and Customer relationships were estimated using the with and without method, which is a form of the income approach.

The with and without method considers the hypothetical impact to the projected cash flows of the business if the asset were not in place.

The amortization for the Developer relationships and Customer relationships intangible assets have been recorded to Research and development and Selling and marketing, respectively, in our Condensed Consolidated Statements of Operations .

The $ 6,029.7 of goodwill recognized, 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.

Stock-Based Compensation

In connection with the Zynga Acquisition, (i) the outstanding and unexercised options to purchase Zynga common stock were assumed by the Company and automatically converted into options exercisable for shares of Take-Two common stock (the “Converted Options”), (ii) the issued and outstanding restricted stock unit awards with respect to Zynga common stock were assumed by the Company and automatically converted into a Take-Two restricted stock unit award with respect to shares of Take-Two common stock (the “Converted RSUs”), and (iii) the issued and outstanding performance stock unit awards with respect to Zynga common stock were assumed by the Company and automatically converted into a Take-Two restricted stock unit award with respect to shares of Take-Two common stock (the “Converted PSUs” and together with the Converted Options and the Converted RSUs, the “Converted Awards”).

As a result, we issued replacement equity options and PSU/RSU awards of 1.5 and 4.2 , respectively.

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 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 December 31, 2022 Nine Months Ended December 31, 2022

Net revenue $ 631.1 1,547.2

Net loss $ 214.0 666.7

Pro-forma Financial Information

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

Pro-forma Net revenue $ 1,407.8 $ 1,600.7 $ 4,281.9 $ 4,691.3

Pro-forma Net loss $ 83.4 $ 76.8 $ 236.7 $ 530.5

The unaudited pro-forma consolidated results above are based on the historical financial statements of Take-Two and Zynga and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of fiscal year 2022 and are not indicative of the future operating results of the combined company.

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 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.

On November 16, 2022, we completed the acquisition of 100 % of 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.

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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 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:

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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 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

The change in our goodwill balance is as follows:

Balance at March 31, 2022 $ 674.6

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 December 31, 2022 $ 6,788.2

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

December 31, 2022

Amount Accumulated

Amortization Net Book

Value Weighted average useful life

Developed Game Technology $ 4,910.5 $ ( 566.9 ) $ 4,343.6 7 years

Branding and Trade Names $ 395.2 $ ( 24.3 ) $ 370.9 12 years

User Base $ 325.4 $ ( 201.6 ) $ 123.8 1 year

Game Engine Technology $ 322.6 $ ( 53.8 ) $ 268.8 4 years

Developer Relationships $ 57.0 $ ( 8.7 ) $ 48.3 5 years

Advertising Technology $ 43.0 $ ( 8.7 ) $ 34.3 3 years

Customer relationships $ 31.0 $ ( 3.8 ) $ 27.2 5 years

Analytics Technology $ 29.6 $ ( 29.5 ) $ 0.1 0 years

Intellectual Property $ 22.3 $ ( 17.5 ) $ 4.8 6 years

In Place Lease $ 1.7 $ ( 0.9 ) $ 0.8 4 years

Total intangible assets $ 6,138.3 $ ( 915.7 ) $ 5,222.6

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

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

2022 2021 2022 2021

Cost of revenue $ 202.8 $ 12.9 $ 501.7 $ 38.6

Selling and marketing $ 80.5 $ 0.8 $ 196.5 $ 4.5

Research and development $ 7.2 $ 1.6 $ 17.5 $ 5.0

Depreciation and amortization $ 11.4 $ 0.6 $ 24.4 $ 1.5

Total amortization of intangible assets $ 301.9 $ 15.9 $ 740.1 $ 49.6

Estimated future amortization of intangible assets that will be recorded in Cost of revenue and operating expenses are as follows:

Fiscal Year Ended March 31, Amortization

2023 (remaining) $ 305.0

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