What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 194 added, 85 removed, 569 unchanged (33% of the section changed)

3 unchanged sentences

(in millions, except per share amounts)

June 30, 2023 March 31, 2023

September 30, 2023 March 31, 2023

Current assets:

2 unchanged sentences

Restricted cash and cash equivalents 424.4 307.6

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

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

Software development costs and licenses 94.5 65.9

29 unchanged sentences

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

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

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

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

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

193.7 and 192.6 shares issued and 170.0 and 168.9 outstanding at September 30, 2023 and March 31, 2023, respectively

Additional paid-in capital 9,183.2 9,010.2

Treasury stock, at cost;

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

23.7 and 23.7 common shares at September 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 June 30,

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

2023 2022 2023 2022

Game $ 1,128.6 $ 1,218.8 $ 2,224.7 $ 2,238.0

7 unchanged sentences

Depreciation and amortization 45.3 29.9 85.7 51.0

Goodwill impairment 165.4 — 165.4 —

Total operating expenses 959.1 932.1 1,842.6 1,636.1

1 unchanged sentence

Interest and other, net ( 31.1 ) ( 50.5 ) ( 56.5 ) ( 79.8 )

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

(Loss) gain on fair value adjustments, net ( 2.2 ) 1.9 ( 1.4 ) ( 37.7 )

Loss before income taxes ( 577.0 ) ( 301.1 ) ( 805.9 ) ( 407.4 )

8 unchanged sentences

Three Months Ended

September 30, Six Months Ended September 30,

2023 2022 2023 2022

Net loss $ ( 543.6 ) $ ( 257.0 ) $ ( 749.6 ) $ ( 361.0 )

2 unchanged sentences

Change in fair value of available for sale securities 0.4 0.5 $ 1.3 0.1

Other comprehensive income (loss) 26.9 ( 63.2 )

Other comprehensive loss ( 62.7 ) ( 115.8 ) $ ( 35.8 ) ( 179.0 )

Comprehensive loss $ ( 606.3 ) $ ( 372.8 ) $ ( 785.4 ) $ ( 540.0 )

3 unchanged sentences

(in millions)

Three Months Ended June 30,

Six Months Ended September 30,

Operating activities:

4 unchanged sentences

Noncash lease expense 32.7 23.3

Amortization of intellectual property 249.6 117.6

Amortization and impairment of intangibles 676.8 438.2

Depreciation 67.9 38.9

Goodwill impairment 165.4 —

Interest expense 71.4 60.0

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

Gain on debt extinguishment ( 7.7 ) —

Fair value adjustments 1.4 38.2

11 unchanged sentences

Purchases of fixed assets ( 59.9 ) ( 99.4 )

Proceeds from sale of long-term investment — 20.6

Purchases of long-term investments ( 6.5 ) ( 7.6 )

8 unchanged sentences

Cost of debt ( 7.5 ) ( 22.4 )

Settlement of capped calls — 140.1

Repayment of debt ( 989.6 ) —

12 unchanged sentences

(in millions)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Common Stock Additional

3 unchanged sentences

Shares Amount Shares Amount

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

Net loss — — — — — ( 543.6 ) — ( 543.6 )

Change in cumulative foreign currency translation adjustment — — — — — — ( 63.1 ) ( 63.1 )

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — 0.4 0.4

Stock-based compensation — — 112.0 — — — — 112.0

Issuance of restricted stock, net of forfeitures and cancellations 0.3 — — — — — — —

Net share settlement of restricted stock awards ( 0.1 ) — ( 15.8 ) — — — — ( 15.8 )

Balance, September 30, 2023 193.7 $ 1.9 $ 9,183.2 ( 23.7 ) $ ( 1,020.6 ) $ 414.7 $ ( 149.1 ) $ 8,430.1

Three Months Ended September 30, 2022

Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Loss Total Stockholder's Equity

Shares Amount Shares Amount

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

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

Change in cumulative foreign currency translation adjustment — — — — — — ( 116.3 ) ( 116.3 )

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

Stock-based compensation — — 125.0 — — — — 125.0

Issuance of restricted stock, net of forfeitures and cancellations 0.6 — — — — — — —

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

Net share settlement of restricted stock awards ( 0.2 ) — ( 23.8 ) — — — — ( 23.8 )

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

See accompanying Notes.

Six Months Ended September 30, 2023

Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders'

Shares Amount Shares Amount

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

4 unchanged sentences

Issuance of restricted stock, net of forfeitures and cancellations 1.3 — — — — — — —

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

Net share settlement of restricted stock awards ( 0.4 ) — ( 57.1 ) — — — — ( 57.1 )

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

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

Balance, September 30, 2023 193.7 $ 1.9 $ 9,183.2 ( 23.7 ) $ ( 1,020.6 ) $ 414.7 $ ( 149.1 ) $ 8,430.1

Six Months Ended September 30, 2022

Common Stock Additional

2 unchanged sentences

Comprehensive

Loss Total Stockholder's Equity

Income (Loss) Total

Stockholders'

Shares Amount Shares Amount

2 unchanged sentences

Change in cumulative foreign currency translation adjustment — — — — — — ( 179.1 ) ( 179.1 )

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

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — 0.1 0.1

Stock-based compensation — — 186.3 — — — — 186.3

Issuance of restricted stock, net of forfeitures and cancellations 1.8 — — — — — — —

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

Net share settlement of restricted stock awards ( 0.6 ) — ( 77.7 ) — — — — ( 77.7 )

3 unchanged sentences

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

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

See accompanying Notes.

27 unchanged sentences

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.

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

REVENUE FROM CONTRACTS WITH CUSTOMERS

6 unchanged sentences

Net revenue by timing of recognition was as follows:

Three Months Ended June 30,

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

2023 2022 2023 2022

Net revenue recognized:

5 unchanged sentences

Net revenue by content was as follows:

Three Months Ended June 30,

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

2023 2022 2023 2022

Net revenue recognized:

4 unchanged sentences

Net revenue by geographic region was as follows:

Three Months Ended June 30,

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

2023 2022 2023 2022

Net revenue recognized:

3 unchanged sentences

Net revenue by platform was as follows:

Three Months Ended June 30,

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

2023 2022 2023 2022

Net revenue recognized:

6 unchanged sentences

Net revenue by distribution channel was as follows:

Three Months Ended June 30,

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

2023 2022 2023 2022

Net revenue recognized:

4 unchanged sentences

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

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.

The balance of deferred revenue, including current and non-current balances as of September 30, 2023 and March 31, 2023 were $ 1,178.1 and $ 1,114.3 , respectively.

For the six months ended September 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 September 30, 2023 and 2022, $ 314.3 and $ 259.3 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

During the six months ended September 30, 2023 and 2022, $ 838.2 and $ 698.9 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of September 30, 2023, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,327.2 , which includes our deferred revenue balances and amounts to be invoiced and recognized as revenue in future periods.

We expect to recognize approximately $ 1,232.0 of this balance as revenue over the next 12 months, and the remainder thereafter.

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

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

As of September 30, 2023 and March 31, 2023, our contract asset balances were $ 82.5 and $ 79.9 , respectively.

MANAGEMENT AGREEMENT

11 unchanged sentences

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

In consideration for ZMC's services, we recorded consulting expense 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 consideration for ZMC's services, we recorded consulting expense in General and administrative expenses on our Condensed Consolidated Statements of Operations of $ 2.4 and $ 1.2 during the three months ended September 30, 2023 and 2022, respectively, and $ 5.2 and $ 3.9 during the six months ended September 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 $ 13.9 and $ 13.0 during the three months ended September 30, 2023 and 2022, respectively, and $ 25.1 and $ 21.5 during the six months ended September 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:

Three Months Ended June 30,

Six Months Ended September 30,

Time-based 97 192

15 unchanged sentences

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

The unvested 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.

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 September 30, 2023 and March 31, 2023, respectively.

During the six months ended September 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

8 unchanged sentences

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

June 30, 2023

September 30, 2023

Quoted prices

14 unchanged sentences

Other assets:

Foreign currency forward contracts — 0.3 — 0.3

Private equity — — 29.0 29.0

1 unchanged sentence

Accrued expenses and other current liabilities:

Foreign currency forward contracts $ — $ 0.1 $ — $ 0.1

Contingent earn-out consideration $ — $ — $ 16.5 $ 16.5

30 unchanged sentences

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 three months ended June 30, 2023.

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

1 unchanged sentence

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

During the three months ended 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.

During the six months ended September 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 .

During the three months ended September 30, 2023, we paid $ 69.5 related to these earn-out consideration arrangements.

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.

1 unchanged sentence

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.

During the three and six months ended September 30, 2023 we recognized General and administrative expense of $( 2.8 ) and $ 6.8 , respectively, within our Condensed Consolidated Statements of Operations for the change in fair value of the contingent earn-out consideration liability associated with the Popcore acquisition.

The fair value of the contingent consideration liability related to the earn-out period is $ 32.4 , with $ 15.2 and $ 17.2 being recorded within Accrued expenses and other current liabilities and Other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheet as of September 30, 2023.

The change 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 $ 1.3 and $ 2.0 recorded within Accrued expenses and other current liabilities and Other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheet as of September 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.

4 unchanged sentences

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

At 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.

At September 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:

June 30, 2023

September 30, 2023

Amortized Cost Gains Losses Fair Value

11 unchanged sentences

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

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

June 30, 2023

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

September 30, 2023

Short-term investments

8 unchanged sentences

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

June 30, 2023 March 31, 2023

September 30, 2023 March 31, 2023

Forward contracts to sell foreign currencies $ 292.8 $ 224.3

Forward contracts to purchase foreign currencies 30.3 51.2

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.

For the three months ended September 30, 2023 and 2022, we recorded a gain of $ 3.6 and a loss of $ 4.6 , respectively, and for the six months ended September 30, 2023 and 2022 we recorded a gain of $ 7.4 and a loss of $ 2.6 , respectively, related to foreign currency forward contracts in Interest and other, net on our Condensed Consolidated Statements of Operations.

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

2 unchanged sentences

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

June 30, 2023 March 31, 2023

September 30, 2023 March 31, 2023

Current Non-current Current Non-current

3 unchanged sentences

Software development costs and licenses $ 94.5 $ 1,270.7 $ 65.9 $ 1,072.2

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.

During the three months ended September 30, 2023 and 2022, we recorded $ 3.5 and $ 6.4 , respectively, of software development impairment charges (a component of Cost of revenue).

The impairment charges recorded during the three months ended September 30, 2023 and 2022 related to 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.

During the six months ended September 30, 2023 and 2022, we recorded $ 21.7 and $ 23.3 , respectively, of software development impairment charges (a component of Cost of revenue).

The impairment charges recorded during the six months ended September 30, 2023 related to 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 six months ended September 30, 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.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

June 30, 2023 March 31, 2023

September 30, 2023 March 31, 2023

Software development royalties $ 651.3 $ 510.7

Compensation and benefits 190.3 177.5

Marketing and promotions 123.8 132.7

Deferred acquisition payments 97.3 82.7

Licenses 113.0 63.0

Marketing and promotions 94.1 132.7

Tax payable 71.9 33.0

Refund liability 53.8 52.4

Deferred acquisition payments 30.2 82.7

Interest payable 29.3 29.6

Sales tax liability 21.7 14.0

Other 60.6 130.1

1 unchanged sentence

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

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

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

2025 Notes 3.55 % April 14, 2025 $ 600.0 $ 579.1

17 unchanged sentences

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)

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

2024 Notes 3.30 % March 28, 2024 $ 350.0 $ 345.4

9 unchanged sentences

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,

Interest expense as it relates to our debt is recorded within Interest and other, net in our Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2023, and 2022, respectively, and was as follows:

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

2023 2022 2023 2022

2024 Notes $ 2.9 $ 8.3 $ 9.4 $ 15.0

7 unchanged sentences

Total $ 31.3 $ 28.9 $ 65.8 $ 49.4

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

Three Months Ended June 30, 2023 Maturities

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

Fiscal Year Ending March 31, Maturities

2024 (remaining) $ 350.0

9 unchanged sentences

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

During the six months ended September 30, 2023, we made interest payments of $ 64.2 .

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.

8 unchanged sentences

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

During the three months ended 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.

During the three months ended September 30, 2023, and 2022, we recognized $ 1.8 and $ 1.4 , respectively, of amortization of debt issuance costs and $ 0.1 and $ 0.1 , respectively, of amortization of the original issuance discount.

During the six months ended September 30, 2023, and 2022, we recognized $ 3.6 and $ 2.6 , respectively, of amortization of debt issuance costs and $ 0.3 and $ 0.2 , 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.

During the three and six months ended September 30, 2023, we recognized a debt extinguishment gain of approximately $ 0.7 and $ 7.7 , respectively, 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.

3 unchanged sentences

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 ( 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.

Loans under the 2022 Credit Agreement will bear interest at a rate of (a) 0.000 % to 0.625 % above an alternate base rate ( 8.50 % at September 30, 2023) or (b) 1.000 % to 1.625 % above Secured Overnight Financing Rate ("SOFR"), approximately 5.32 % at September 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.

In addition, the 2022 Credit Agreement 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).

In addition, the 2022 Credit Agreement 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).

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 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.

During the three months ended September 30, 2023, and 2022, we amortized $ 0.1 and $ 0.2 , respectively, and during the six months ended September 30, 2023 and 2022 we amortized $ 0.3 and $ 0.3 , respectively, of these debt issuance costs.

As of September 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

September 30, 2023 March 31, 2023

Available borrowings $ 499.5 $ 499.5

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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 June 30, 2023.

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 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.

As of September 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 13 - 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 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.

As of September 30, 2023, we recorded $ 23.1 as the fair value of the remaining outstanding 2024 Convertible Notes, within Short-term debt, net, and $ 24.2 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 September 30, 2023 and 2022, we recognized a loss of $ 1.7 and a gain of $ 1.5 , respectively, and during the six months ended September 30, 2023 and 2022, we recognized a loss of $ 3.2 and a loss of $ 46.3 , respectively, within (Loss) gain 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,

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

2023 2022 2023 2022

Computation of Basic and diluted loss per share:

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Basic and diluted loss per share $ ( 3.20 ) $ ( 1.54 ) $ ( 4.42 ) $ ( 2.38 )

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

We incurred a net loss for the three and six months ended September 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.

For the three months ended September 30, 2023, we had 2.0 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 six months ended September 30, 2023, we had 1.9 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 six months ended September 30, 2023, 1.3 restricted stock awards vested, we granted 2.2 unvested restricted stock awards, and 0.3 unvested restricted stock awards were forfeited.

COMMITMENTS AND CONTINGENCIES

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

The benefit from income taxes for the three months ended 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 benefit from income taxes for the three months ended September 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 $ 33.4 for the three months ended September 30, 2023, as compared to the benefit from income taxes of $ 44.1 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 5.8 % for the three months ended September 30, 2023 was due primarily to tax expense of $ 56.3 related to an increase in the U.S.

valuation allowance, tax expense of $ 33.5 related to the impairment of nondeductible goodwill, $ 8.1 related to the revaluation of deferred taxes due to a change in the statutory tax rate in Turkey, offset by tax benefits of $ 21.6 from tax credits and by the geographic mix of earnings.

The benefit from income taxes for the six months ended September 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 $ 56.3 for the six months ended September 30, 2023, as compared to the benefit from income taxes of $ 46.4 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 7.0 % for the six months ended September 30, 2023 was due primarily to tax expense of $ 81.6 related to an increase in the U.S.

valuation allowance, tax expense of $ 33.5 related to the impairment of nondeductible goodwill, $ 8.1 related to the revaluation of deferred taxes due to a change in the statutory tax rate in Turkey, offset by tax benefits of $ 42.0 from tax credits and by the geographic mix of earnings.

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

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

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

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

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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.

GOODWILL AND INTANGIBLE ASSETS, NET

The change in our goodwill balance is as follows:

Balance at March 31, 2023 $ 6,767.1

Additions from immaterial acquisitions 20.0

Impairment ( 165.4 )

Currency translation adjustment ( 21.4 )

Balance at September 30, 2023 $ 6,600.3

During the three and six months ended September 30, 2023, we recognized a goodwill impairment charge of $ 165.4 representing a partial impairment related to one of our reporting units.

We identified various qualitative factors that, collectively, indicated that the fair value of one of our reporting units was more likely than not less than its carrying amount, including a reduction in the forecasted performance of the reporting unit due to industry conditions and changes in our strategies for games within the reporting unit in response to those conditions.

As a result of this qualitative analysis, we performed a valuation of the reporting unit using discounted cash flow and guideline public company methodologies.

Key assumptions and estimates used in deriving the fair value are forecasted revenue, EBITDA margins, long-term decay rate, and discount rate.

There were no goodwill impairment charges for the three and six months ended September 30, 2022.

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

September 30, 2023 March 31, 2023

Amount Accumulated

Amortization Net Book

Amount Accumulated

Amortization Net Book

Value Weighted average useful life

Developed Game Technology $ 4,184.2 $ ( 1,053.9 ) $ 3,130.3 $ 4,434.5 $ ( 744.0 ) $ 3,690.5 7 years

Branding and Trade Names 394.9 ( 50.7 ) 344.2 395.2 ( 33.1 ) 362.1 12 years

Game Engine Technology 321.1 ( 109.9 ) 211.2 323.2 ( 73.5 ) 249.7 4 years

User Base 319.2 ( 319.2 ) — 319.2 ( 274.4 ) 44.8 0 years

Developer Relationships 57.0 ( 19.4 ) 37.6 57.0 ( 12.2 ) 44.8 5 years

Advertising Technology 43.0 ( 19.5 ) 23.5 43.0 ( 12.3 ) 30.7 3 years

Customer relationships 31.0 ( 8.4 ) 22.6 31.0 ( 5.3 ) 25.7 5 years

Analytics Technology 29.3 ( 29.3 ) — 30.1 ( 30.1 ) — 0 years

Intellectual Property 27.5 ( 21.3 ) 6.2 22.3 ( 18.2 ) 4.1 6 years

In Place Lease 1.9 ( 1.2 ) 0.7 1.9 ( 1.1 ) 0.8 4 years

Total intangible assets $ 5,409.1 $ ( 1,632.8 ) $ 3,776.3 $ 5,657.4 $ ( 1,204.2 ) $ 4,453.2

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

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

2023 2022 2023 2022

Cost of revenue $ 409.6 $ 201.6 $ 596.8 $ 298.9

Selling and marketing 1.6 101.0 47.9 116.0

Research and development 7.2 9.2 14.3 10.3

Depreciation and amortization 8.9 8.9 17.8 13.0

Total amortization of intangible assets $ 427.3 $ 320.7 $ 676.8 $ 438.2

During the three and six months ended September 30, 2023, we recorded impairment charges of $ 219.7 for acquisition-related Developed Game Technology intangible assets within Cost of revenue as a result of a reduction in the forecasted performance of certain games due to industry conditions and changes in our strategies for certain games in response to those conditions.

The fair value of those intangible assets was measured using the multi-period excess earnings method, consistent with the approach used at acquisition.

Key assumptions and estimates used in deriving the fair value are forecasted revenue, EBITDA margins, long-term decay rate, and discount rate.

There were no impairment charges for intangible assets for the three and six months ended September 30, 2022.

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

2024 (remaining) $ 388.3

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