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Item 7. Management’s Discussion and Analysis

2024-05-22 compared with 2023-05-26 · 171 added, 194 removed, 190 unchanged (66% of the section changed)

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Refer to Item 1 - Business for additional discussion.

Zynga Acquisition and Related Debt Transactions

We acquired Zynga on May 23, 2022, for consideration having an acquisition date fair value of $9,521.8, consisting of $3,992.4 in cash, the issuance of 46.3 shares of our common stock, valued at $5,377.7, and $151.7 of replacement equity awards attributable to the pre-acquisition service period.

Refer to Note 2 0 - Acquisitions of our Consolidated Financial Statements.

Zynga is a leading developer of mobile games with a mission to connect the world through games.

Also, in connection with the Zynga Acquisition, we entered into several debt transactions (refer to Note 11 - Debt ).

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 the2027 Notes, the “Senior Notes”).

The Senior Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee (the “Trustee”).

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

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

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

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

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

During the fiscal year ended March 31, 2023, we made interest payments of $31.5.

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 fiscal year ended March 31, 2023, we made interest payments of $31.8.

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

On May 23, 2022, we entered into a new unsecured Credit Agreement (the "2022 Credit Agreement"), which replaced in its entirety the Company's prior Credit Agreement and provides for an unsecured five-year revolving credit facility with commitments of $500.0, including sublimits for (i) the issuance of letters of credit in an aggregate face amount of up to $100.0 and (ii) borrowings and letters of credit denominated in Pounds Sterling, Euros, and Canadian Dollars in an aggregate principal amount of up to $100.0.

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 (8.00% at March 31, 2023) or (b) 1.000% to 1.625% above Secured Overnight Financing Rate ("SOFR"), approximately 4.80% at March 31, 2023, which rates are determined by the Company's credit rating.

On June 22, 2022, we drew down approximately $200.0 at 3.28% from our facility under the 2022 Credit Agreement.

In December 2022, we fully repaid the $200.0 drawdown, and, at March 31, 2023, there were no borrowings under the 2022 Credit Agreement.

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 rates are determined by reference to our credit rating.

We fully drew down on the Term Loan on June 22, 2022 at 3.6%.

In April 2023, we fully repaid the $350.0 Term Loan.

The proceeds from our draw-downs of the 2022 Credit Agreement and Term Loan were used to finance a portion of the settlement of the Convertible Notes acquired from Zynga.

In total, we paid $321.62 for the tendered or converted 2024 Convertible Notes, including interest, and $845.14 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 $29.40 aggregate principal amount of the 2026 Convertible Notes remained outstanding at March 31, 2023.

Cybersecurity Incident

In September 2022, we experienced a network intrusion in which an unauthorized third party illegally accessed and downloaded confidential information from our systems, including early development footage of the next installment in the Grand Theft Auto franchise.

We immediately took steps to isolate and contain the incident.

Rockstar Games did not experience and does not anticipate any disruption to its current services nor any long-term effect on its development timelines as a result of this incident.

Subsequently, also in September 2022, we became aware that an unauthorized third party illegally accessed credentials for a vendor platform that 2K Games uses to provide help desk support to its customers.

The unauthorized party sent a communication to certain players containing a malicious link.

2K Games immediately notified all affected users and took steps to restrict further unauthorized activity until service was restored.

In connection with this activity (the “Cybersecurity

Incident”), we have incurred certain immaterial incremental one-time costs related to consultants, experts and data recovery efforts and expect to incur additional costs related to cybersecurity protections in the future.

We are in the process of implementing a variety of measures to enhance further our cybersecurity protections.

Popcore Acquisition

We acquired Popcore on November 16, 2022 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.

Refer to Note 20 - Acquisitions of our Consolidated Financial Statements.

Founded in 2018, Popcore is a mobile games company based in Berlin best known for Parking Jam 3D and Pull the Pin .

During the fiscal year ended March 31, 2024, we recognized Goodwill impairment charges of $2,342.1, representing a partial impairment related to one of our reporting units, and we recognized impairment charges of $577.4 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 in response to those conditions.

Key assumptions and estimates used in deriving the fair values of these assets are forecasted revenue, EBITDA margins, long-term decay rate, and discount rate (refer to Note 9 - Goodwill and Intangible Assets, Net ).

Future changes in those key assumptions and estimates could result in additional impairments.

During the fiscal year ended March 31, 2024, we also recognized impairment charges related to our Software development costs and licenses of $109.9, of which $88.2 related to title cancellations as part of our cost reduction program (refer to Note 7 - Software Development Costs and Licenses and Note 21 - Business Reorganization) .

Debt Transactions

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 January 8, 2024, we completed our add-on offering and sale of $350.0 aggregate principal amount of our senior notes, consisting of $50.0 principal amount of additional 2026 Notes and $300.0 principal amount of additional 2028 Notes.

The additional 2026 Notes and additional 2028 Notes (the “New Notes”) were issued as additional notes under the existing Indenture (refer to Note 11 - Debt ).

Our 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 2026 Notes and 2028 Notes semi-annually on March 28 and September 28 of each year, commencing September 28, 2023 for the 2026 Notes and 2028 Notes.

During the fiscal year ended March 31, 2024, we made interest payments of $137.0 for our various debt obligations.

On June 5, 2023, pursuant to a tender offer, we purchased and retired $650.0 in aggregate principal amount of our 3.300% Senior Notes due 2024 (the "2024 Notes"), with proceeds received from the 2026 Notes and 2028 Notes.

We repaid the remaining $350.0 of principal amount of our 2024 Notes on their maturity date on March 28, 2024, with proceeds received from the issuance of the New Notes.

During the fiscal year ended March 31, 2024, we recognized a debt extinguishment gain of approximately $7.7, net of unamortized debt discount and debt issuance costs recorded within Interest and other, net in our Consolidated Statement of Operations.

Trends and Factors Affecting our Business

Product Release Schedule.

Our financial results are affected by the timing of our product releases and the commercial success of those titles.

Our financial results are affected by the timing of our product releases and the commercial success of our titles.

Generally, a significant portion of our revenue has been derived from a few popular franchises, particularly around new releases within those franchises, some of which have annual or biennial releases.

Our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue.

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Economic Environment and Retailer Performance.

We continue to monitor various macroeconomic and geopolitical factors that may affect our business in several areas, including consumer demand, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates.

We continue to monitor various macroeconomic and geopolitical factors that may affect our business in several areas, including consumer demand, inflation, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates.

For example, in response to the conflict in Ukraine, we suspended sales of our products in Russia and Belarus, which had a negative impact on our financial results.

Actions taken to date and other potential actions could result in additional negative impact in future periods.

Additionally, our business is dependent upon a limited number of customers that account for a significant portion of our revenue.

Our five largest customers accounted for 79.6%, 79.0% and 78.4% of net revenue during the fiscal years ended March 31, 2023, 2022 and 2021, respectively.

As of March 31, 2023, and 2022, five customers comprised 61.1% and 72.8% of our gross accounts receivable, respectively, with our significant customers (those that individually comprised more than 10% of our gross accounts receivable balance) accounting for 50.3% and 63.8% of such balance at March 31, 2023, and 2022, respectively.

We had three customers who accounted for 21.6%, 14.5%, and 14.2% of our gross accounts receivable as of March 31, 2023, and two customers who accounted for 43.5% and 20.3% of our gross accounts receivable as of March 31, 2022.

We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2023, and 2022.

The economic environment has affected our customers in the past and may do so in the future.

Bankruptcies or consolidations of our large retail customers could seriously hurt our business, due to uncollectible accounts receivable and the concentration of purchasing power among the remaining large retailers.

There has been increased consolidation in our industry, as larger, better capitalized competitors will be in a stronger position to withstand prolonged periods of economic downturn and sustain their business through the financial volatility.

Also, bankruptcies or consolidations of our large retail customers could seriously hurt our business, due to uncollectible accounts receivable and the concentration of purchasing power among the remaining large retailers.

Hardware Platforms.

We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties, which comprised 43.1% of our net revenue by product platform for the fiscal year ended March 31, 2023.

The success of our business is dependent upon the consumer acceptance of these platforms and the continued growth in the installed base of these platforms.

When new hardware platforms are introduced, such as those released in November 2020 by Sony and Microsoft, demand for interactive entertainment used on older platforms typically declines, which may negatively affect our business during the market transition to the new consoles.

The latest Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles), which could mitigate the risk of such a decline.

We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties.

Such console revenue comprised 40.5% of our net revenue by product platform for the fiscal year ended March 31, 2024.

The success of our business is dependent upon consumer acceptance of these platforms and the continued growth in the installed base of these platforms.

When new hardware platforms are introduced, demand for interactive entertainment used on older platforms typically declines, which may negatively affect our business during the market transition to the new consoles.

The latest Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles).

The inclusion of such features on new consoles could mitigate

the risk of such a decline.

However, we cannot be certain how backwards compatibility will affect demand for our products.

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Online Content and Digital Distribution.

The interactive entertainment software industry is delivering a growing amount of content through digital online delivery methods.

We provide a variety of online delivered products and offerings.

Virtually all of our titles that are available through retailers as packaged goods products are also available through direct digital download (from digital storefronts we own and others owned by third parties) as well as a large selection of our catalog titles.

In addition, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through virtual currency, add-on content, and in-game purchases.

As disclosed in our "Results of Operations," below, net

revenue from digital online channels comprised 95.1% of our net revenue for the fiscal year ended March 31, 2023.

We provide a variety of online delivered products, including direct digital downloads of our titles, and access to additional offerings through virtual currency, add-on content, and in-game purchases, which drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles.

Net revenue from digital online channels comprised 95.6% of our net revenue for the fiscal year ended March 31, 2024.

We expect online delivery of games and game offerings to continue to be the primary part of our business over the long term.

We also publish an expanding variety of titles for mobile, which are delivered to consumers through digital download, and are primarily distributed, marketed, and promoted through third parties, primarily Apple’s App Store and the Google Play Store.

A significant portion of our mobile titles are distributed, marketed, and promoted through third parties, primarily Apple’s App Store and the Google Play Store.

Virtual items for our mobile games are purchased through the payment processing systems of these platform providers.

We generate a significant portion of our net revenue through the Apple and Google platforms and expect to continue to do so for the foreseeable future as we launch more games for mobile.

We generate a significant portion of our net revenue through the Apple and Google platforms and expect to continue to do so for the foreseeable future.

Apple and Google generally have the discretion to set the amounts of their platform fees and change their platforms’ terms of service and other policies with respect to us or other developers at their sole discretion, and those changes may be unfavorable to us.

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Accordingly, the overall product mix between mobile and other game sales may affect our gross margin percentage.

We are also starting to expand our direct-to-consumer efforts more meaningfully across our mobile portfolio to enhance profitability.

We are also expanding our direct-to-consumer efforts more meaningfully across our mobile portfolio to enhance profitability.

In addition, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through virtual currency, add-on content, in-game purchases, and in-game advertising, all of which are typically delivered digitally.

Player acquisition costs.

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These expenditures, which are recorded within Sales and marketing in our Consolidated Statements of Operations, generally relate to the promotion of new game launches and ongoing performance-based programs to drive new player acquisition and lapsed player reactivation.

Over time, these acquisition and retention-related programs may become either less effective or costlier, negatively impacting our operating results.

Over time, the effectiveness or cost of these acquisition and retention-related programs may change, affecting our operating results.

Content Release Highlights

During fiscal year 2023, 2K released The Quarry , NBA 2K23 , PGA TOUR 2K23 , New Tales from the Borderlands , Marvel's Midnight Suns, and WWE 2K23;

and Private Division released Rollerdrome and Kerbal Space Program 2 early access on PC.

To date we have announced that, during fiscal year 2024, 2K will release LEGO 2K Drive , NBA 2K24 , and WWE 2K24 ;

Zynga will release Star Wars Hunters ;

and Private Division will release After Us .

During fiscal year 2024, 2K released WWE 2K24, LEGO 2K Drive and NBA 2K24 ;

Zynga released Match Factory!

and Top Troops ;

and Private Division released Penny's Big Breakaway.

During fiscal year 2025 to date, 2K released TopSpin 2K25 and Private Division released No Rest for the Wicked early access on PC.

Rockstar plans to release Grand Theft Auto VI in the Fall of calendar 2025.

In addition, throughout the year, we expect to continue to deliver new content for our franchises.

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Fiscal 2024 Financial Summary

Our net revenue for fiscal year ended March 31, 2023 was led by net revenue of $2,159.2 from Zynga, which we acquired in May 2022 (refer to Note 20 - Acquisitions ), including top contributors Empires & Puzzles , Toon Blast , our hyper-casual mobile portfolio, Words With Friends, and Merge Dragons!, as well as a variety of our top franchises, primarily NBA 2K, Grand Theft Auto, Red Dead Redemption , and WWE 2K.

Our net revenue increased to $5,349.9, an increase of $1,845.1 or 52.6% compared to the fiscal year ended March 31, 2022.

For the fiscal year ended March 31, 2023, our net loss was $(1,124.7), as compared to net income of $418.0 in the prior year.

Diluted loss per share for the fiscal year ended March 31, 2023 was $(7.03), as compared to Diluted earnings per share of $3.58 for the fiscal year ended March 31, 2022.

Our operating loss for the fiscal year ended March 31, 2023 was $(1,165.2) compared to operating income of $473.6 for fiscal year ended March 31, 2022, due to (i) higher cost of revenue due to fees paid to platform partners due to an increase in mobile revenues and higher amortization of intangible assets as a result of the Zynga acquisition and (ii) higher operating expenses for marketing, personnel, and amortization of intangible assets as a result the Zynga acquisition.

At March 31, 2023, we had $1,234.6 of Cash and cash equivalents and Restricted cash and cash equivalents, compared to $2,195.4 at March 31, 2022.

The decrease in Cash and cash equivalents and Restricted cash and cash equivalents from March 31, 2022 was due to Net cash used by investing activities primarily related to our acquisition of Zynga (refer to Note 20 - Acquisitions ).

This net decrease was partially offset by Net cash provided by financing activities (refer to Note 11 - Debt ), primarily related to proceeds from the issuance of our Senior Notes and a draw-down on our Term Loan, which were partially offset by payments for Convertible Notes that were assumed as part of our Zynga acquisition.

To a lesser extent, the net decrease was also partially offset by Net cash provided by operating activities from sales of our products, primarily from the previously mentioned titles , partially offset by working capital requirements used in the development, sale, and support of our products, including for personnel, as well as payments for interest on our debt and transaction-related costs related to our Zynga Acquisition.

Our net revenue for the fiscal year ended March 31, 2024 was essentially flat year-on-year at $5,349.6, a decrease of $0.3 or 0.0% compared to the fiscal year ended March 31, 2023 and included net revenue of $2,390.9 from Zynga, which we acquired in May 2022 (refer to Note 20 - Acquisitions ), including top contributors Toon Blast , our hyper-casual mobile portfolio, Empires & Puzzles, Merge Dragons!

, and Words With Friends, as well as a variety of our top franchises, primarily NBA 2K, Grand Theft Auto, Red Dead Redemption , and WWE 2K.

Our operating loss for the fiscal year ended March 31, 2024 was $3,590.6 compared to operating loss of $1,165.2 for fiscal year ended March 31, 2023, primarily due to Goodwill impairment charges of $2,342.1, representing a partial impairment related to one of our reporting units.

For the fiscal year ended March 31, 2024, our net loss was $3,744.2, as compared to net loss of $1,124.7 in the prior year.

Diluted loss per share for the fiscal year ended March 31, 2024 was $22.01, as compared to Diluted loss per share of $7.03 for the fiscal year ended March 31, 2023.

At March 31, 2024, we had $1,102.0 of Cash, cash equivalents, and restricted cash and cash equivalents, compared to $1,234.6 at March 31, 2023.

The decrease was primarily due to Net cash used in financing activities, primarily related to net share settlements of our restricted stock awards and payment of contingent earn-outs for prior acquisitions, partially offset by issuance of common stock and our net debt activity.

The debt activity included proceeds from the issuance of 2026 Notes and

2028 Notes offset by our repayment of 2024 Notes and Term Loan (refer to Note 11 - Debt ).

To a lesser extent, the decrease was also due to i) Net cash used in investing activities, which was due primarily to the purchase of fixed assets and our individually immaterial acquisitions and investments, offset by our sales and maturities of available for sale securities, and ii) Net cash used in operating activities, which was due primarily to investments in software development and licenses, partially offset by sales of our products.

Critical Accounting Policies and Estimates

Our most critical accounting policies, which are those that require significant judgment, include revenue recognition;

price protection and allowances for returns;

capitalization and recognition of software development costs and licenses;

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For the fiscal year ended March 31, 2024, Net Bookings increased by $49.4 as compared to the prior year.

The increase was primarily due to Net Bookings from Zynga, which we acquired in May 2022 (refer to Note 2 0 - Acquisitions ), including top contributors Empires & Puzzles , our hyper-casual mobile portfolio, Toon Blast , Words With Friends , and Merge Dragons!.

This increase was partially offset by a decrease in Net Bookings from our Grand Theft Auto and Borderlands franchises.

The increase was primarily due to an increase in Net Bookings of $247.5 from Zynga, which we acquired in May 2022 (refer to Note 20 - Acquisitions ), including from our hyper-casual mobile portfolio, which benefited from our November 2022 acquisition of Popcore (refer to Note 20 - Acquisitions ), and our other top contributors Toon Blast , Empires & Puzzles , Words with Friends, and Merge Dragons!, as well as an increase in Net Bookings from our Grand Theft Auto and Red Dead Redemption franchises, including our August 2023 release of Red Dead Redemption and Undead Nightmare.

This increase was partially offset by a decrease in Net Bookings from Tiny Tina's Wonderlands , which released in March 2022, The Quarry , which released in June 2022, and our Sid Meier's Civilization, PGA TOUR 2K, the latest installment of which, PGA TOUR 2K23 released in October 2022, and NBA 2K franchises.

Results of Operations

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Depreciation and amortization 171.2 3.2 % 122.3 2.3 % 61.1 1.7 %

Goodwill impairment 2,342.1 43.8 % — — % — — %

Business reorganization 104.6 1.9 % 14.6 0.3 % 0.8 — %

Total operating expenses 5,832.4 109.0 % 3,450.5 64.5 % 1,495.8 42.7 %

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(Loss) income before income taxes (3,702.8) (69.2) % (1,338.1) (25.0) % 465.4 13.3 %

(Benefit from) provision for income taxes (213.4) (4.0) % 47.4 1.4 % 88.9 2.6 %

Provision for (benefit from) income taxes 41.4 0.8 % (213.4) (4.0) % 47.4 1.4 %

Net (loss) income $ (3,744.2) (70.0) % $ (1,124.7) (21.0) % $ 418.0 11.9 %

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2024 2023 2022

Net revenue by geographic region:

United States $ 3,360.0 62.8 % $ 2,100.2 59.9 % $ 2,015.9 59.8 %

International 1,989.9 37.2 % 1,404.6 40.1 % 1,356.9 40.2 %

Net revenue by platform:

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Fiscal Years ended March 31, 2024 and 2023

(millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease)

2024 % of net revenue 2023 % of net revenue Increase/(decrease) % Increase/(decrease)

Total net revenue $ 5,349.6 100.0 % $ 5,349.9 100.0 % $ (0.3) — %

Software development costs and royalties (1)

1,604.8 30.0 % 417.4 11.9 % 1,187.4 284.5 %

Game intangibles 1,301.1 24.3 % 1,169.7 21.9 % 131.4 11.2 %

Product costs 756.6 14.1 % 714.0 13.3 % 42.6 6.0 %

Internal royalties 397.6 7.4 % 438.9 8.2 % (41.3) (9.4) %

Software development costs and royalties (1)

346.7 6.5 % 435.1 8.1 % (88.4) (20.3) %

Licenses 305.8 5.8 % 306.9 5.7 % (1.1) (0.4) %

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(1) Includes $24.4 and $(9.5) of stock-based compensation expense in fiscal year 2024 and 2023, respectively.

For the fiscal year ended March 31, 2023, net revenue increased by $1,845.1, as compared to the prior year.

The increase was due primarily to net revenue of $2,159.2 from Zynga, which we acquired in May 2022 (refer to Note 2 0 - Acquisitions ), including top contributors Empires & Puzzles , our hyper-casual mobile portfolio, Toon Blast , Words With Friends, and Merge Dragons!

, partially offset by a decrease in net revenue of $302.6 from our Grand Theft Auto franchise and $71.9 from our Borderlands franchise.

For the fiscal year ended March 31, 2024, net revenue decreased by $0.3, as compared to the prior year.

The decrease was due primarily to a decrease in net revenue of $58.0 from Tiny Tina's Wonderlands , which released in March 2022, $44.2 from The Quarry , which released in June 2022, $38.9 from our Sid Meier's Civilization franchise, and $30.0 from our NBA 2K franchise.

The decrease was partially offset by an increase in net revenue of (i) $225.7 from Zynga, which we acquired in May 2022 (refer to Note 20 - Acquisitions ), including top contributors Toon Blast, our hyper-casual mobile portfolio, which benefited from our November 2022 acquisition of Popcore (refer to Note 20 - Acquisitions ), Empires & Puzzles, Merge Dragons!, and Words with Friends, and (ii) $41.0 from our Red Dead Redemption franchise, including our August 2023 release of Red Dead Redemption and Undead Nightmare .

Net revenue from mobile increased by $209.4 and accounted for 51.4% of our total net revenue in the fiscal year ended March 31, 2024, as compared to 47.5% in the prior year.

The increase was due to an increase in net revenue of $205.2 from Zynga, including top contributors Toon Blast , our hyper-casual mobile portfolio, Empires & Puzzles , Merge Dragons!

, and Words with Friends, as well as an increase in our Grand Theft Auto franchise, partially offset by a decrease in Two Dots and our WWE 2K franchise.

Net revenue from console games decreased by $136.5 and accounted for 40.5% of our total net revenue in the fiscal year ended March 31, 2024, as compared to 43.0% in the prior year.

The decrease was due to a decrease in net revenue from our Grand Theft Auto and Red Dead Redemption franchises, partially offset by an increase in net revenue from The Quarry , which released in June 2022 and our WWE 2K franchise.

The decrease was due to a decrease in net revenue from The Quarry , Tiny Tina's Wonderlands, our Grand Theft Auto, NBA 2K, PGA TOUR 2K, the latest installment of which, PGA TOUR 2K23 released in October 2022 , Mafia, and Borderlands franchises, partially offset by an increase in net revenue from our Red Dead Redemption franchise and LEGO 2K Drive , which released in May 2023.

Net revenue from PC and other decreased by $73.2 and accounted for 8.1% of our total net revenue in the fiscal year ended March 31, 2024, as compared to 9.5% in the prior year.

The decrease was due to a decrease in net revenue from our Borderlands , Grand Theft Auto , and Red Dead Redemption franchises, partially offset by an increase in net revenue from Zynga and Marvel's Midnight Suns .

Net revenue from mobile increased by $2,135.2 and accounted for 47.5% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 11.5% in the prior year.

The increase was due to an increase in net revenue of $2,145.2 from Zynga, including top contributors Empires & Puzzles , our hyper-casual mobile portfolio, Toon Blast , Words With Friends , and Merge Dragons!, as well as an increase in Top Eleven , partially offset by a decrease in Two Dots .

The decrease was due to a decrease in net revenue from our Sid Meier's Civilization franchise;

Tiny Tina's Wonderlands;

our NBA 2K franchise;

our Borderlands franchise;

Marvel's Midnight Suns, which released in December 2022;

and our XCOM and Red Dead Redemption franchises, partially offset by an increase in net revenue of $20.6 from Zynga, including top contributors Hit It Rich and Zynga Poker, and our Grand Theft Auto franchise.

Net revenue from digital online channels increased by $26.5 and accounted for 95.6% of our total net revenue for the fiscal year ended March 31, 2024, as compared to 95.1% in the prior year.

The increase was due to net revenue of $2,158.5 from Zynga, including top contributors Empires & Puzzles , our hyper-casual mobile portfolio, Toon Blast , Words With Friends, and Merge Dragons!, as well as an increase in net revenue from Top Eleven.

These increases were partially offset by a decrease in net revenue from our Grand Theft Auto , Borderlands and Red Dead Redemption franchises .

The increase was due to an increase in net revenue of $226.2 from Zynga, including top contributors Toon Blast , our hyper-casual mobile portfolio , Empires & Puzzles, Merge Dragons!, and Words with Friends, as well as an increase in net revenue from our Red Dead Redemption franchise .

These increases were partially offset by a decrease in net revenue from Tiny Tina's Wonderlands , our Sid Meier's Civilization franchise and The Quarry.

Net revenue from physical retail and other channels decreased by $26.8 and accounted for 4.4% of our total net revenue for the fiscal year ended March 31, 2024, as compared to 4.9% for the prior year.

The decrease was due to a decrease in net revenue from our Grand Theft Auto and NBA 2K franchises.

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.

The decrease was due to a decrease in net revenue from our NBA 2K franchise;

The Quarry, Marvel's Midnight Suns, our PGA TOUR 2K franchise, and Tiny Tina's Wonderlands.

These decreases were partially offset by an increase in net revenue from our Red Dead Redemption franchise and LEGO 2K Drive.

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.

Net revenue from recurrent consumer spending increased by $33.1 and accounted for 78.8% of net revenue for the fiscal year ended March 31, 2024, as compared to 78.1% for the prior year.

The increase was due to an increase in net revenue of $2,125.3 from Zynga, including top contributors Empires & Puzzles , our hyper-casual mobile portfolio, Toon Blast , Words With Friends, and Merge Dragons!

, as well as an increase in net revenue from Top Eleven , partially offset by a decrease in net revenue from our Grand Theft Auto franchise.

The increase was due to an increase in net revenue of $224.5 from Zynga, including top contributors Toon Blast , our hyper-casual mobile portfolio, Empires & Puzzles , Merge Dragons!, and Words With Friends, partially offset by a decrease in net revenue from our Grand Theft Auto franchise, Tiny Tina's Wonderlands, our NBA 2K franchise, Two Dots, and our Sid Meier's Civilization franchise.

Net revenue from full game and other decreased by $33.4 and accounted for 21.2% of net revenue for the fiscal year ended March 31, 2024, as compared to 21.9% for the prior year.

The decrease was due to a decrease in net revenue from our Grand Theft Auto , Borderlands, and Red Dead Redemption franchises, partially offset by an increase in net revenue from The Quarry , Zynga, and our WWE 2K franchise.

The decrease was due to a decrease in net revenue from The Quarry, Tiny Tina's Wonderlands, our Sid Meier's Civilization, PGA TOUR 2K, and Mafia franchises, partially offset by an increase in net revenue from our Grand Theft Auto and Red Dead Redemption franchises, and LEGO 2K Drive .

Gross profit as a percentage of net revenue for the fiscal year ended March 31, 2024 was 41.9%, as compared to 42.7% in the prior year.

The percentage decrease was due primarily to (i) higher amortization related to intangible assets related to our Zynga acquisition, including a $465.3 impairment charge (refer to Note 9 - Goodwill and Intangible Assets, net ), and (ii) higher product costs for fees paid to platform partners due to an increase in mobile revenues as a result of the Zynga acquisition, partially offset by (i) lower internal royalties due to the timing of when royalties are earned and (ii) lower capitalized software amortization due to the timing of releases.

Net revenue earned outside of the United States increased by $585.3 and accounted for 37.2% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 40.1% in the prior year.

The increase in net revenue outside of the United States was due to net revenue of $732.1 from Zynga, including top contributors Empires & Puzzles , our hyper-casual mobile portfolio, Toon Blast , Zynga Poker , and Merge Dragons!

, as well as an increase in net revenue from Top Eleven .

These increases were partially offset by a decrease in net revenue from our Grand Theft Auto franchise.

Changes in foreign currency exchange rates decreased net revenue and gross profit by $34.1 and $18.3, respectively, in the fiscal year ended March 31, 2023 as compared to the prior year.

The percentage decrease was due primarily to higher amortization related to intangible assets related to our Zynga acquisition, including a $577.4 impairment charge (refer to Note 9 - Goodwill and Intangible Assets, net ) partially offset by lower internal royalties due to the timing of when royalties are earned.

Changes in foreign currency exchange rates increased net revenue and gross profit by $10.2 and $3.5, respectively, in the fiscal year ended March 31, 2024 as compared to the prior year.

Operating Expenses

(millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease)

2024 % of net revenue 2023 % of net revenue Increase/(decrease) % Increase/(decrease)

Selling and marketing $ 1,550.2 29.0 % $ 1,586.5 29.7 % $ (36.3) (2.3) %

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Depreciation and amortization 171.2 3.2 % 122.3 2.3 % 48.9 40.0 %

Goodwill impairment 2,342.1 43.8 % — — % 2,342.1 100.0 %

Business reorganization 104.6 1.9 % $ 14.6 0.3 % 90.0 616.4 %

Total operating expenses $ 5,832.4 109.0 % $ 3,450.5 64.5 % $ 2,381.9 69.0 %

Includes stock-based compensation expense, which was allocated as follows (in millions):

Includes stock-based compensation expense, which was allocated as follows:

Selling and marketing $ 95.3 $ 95.2

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General and administrative 111.5 115.5

Foreign currency exchange rates decreased total operating expenses by $72.0 in the fiscal year ended March 31, 2023 as compared to the prior year.

Foreign currency exchange rates increased total operating expenses by $19.5 for the fiscal year ended March 31, 2024 as compared to the prior year.

Selling and marketing

Selling and marketing expenses increased by $1,076.2 in the fiscal year ended March 31, 2023 as compared to the prior year, due primarily to (i) marketing expense for titles from our Zynga acquisition, including our hyper-casual mobile portfolio, Toon Blast , Merge Dragons!

, Empires & Puzzles , and Toy Blast, (ii) higher amortization related to intangible assets related to our Zynga acquisition, and (iii) higher personnel expenses for additional headcount, including related to our acquisition of Zynga.

Selling and marketing expenses decreased by $36.3 for the fiscal year ended March 31, 2024 as compared to the prior year period, due primarily to lower amortization related to intangible assets offset by an increase in personnel expense due to increased headcount, including as a result of our Zynga acquisition.

Research and development

Research and development expenses increased by $485.9 for the fiscal year ended March 31, 2023, as compared to the prior year, due primarily to an increase in (i) personnel expenses due to increased headcount, including related to our acquisition of Zynga and (ii) production and development expenses related to Zynga.

Research and development expenses increased by $60.6 for the fiscal year ended March 31, 2024, as compared to the prior year period, due primarily to increases in personnel expenses due to increased headcount, including related to our acquisition of Zynga.

These increases were partially offset by lower production and development expenses primarily due to a reduction in the number of titles in development at certain studios as a result of our ongoing development pipeline management process and additional capitalization of costs for development on titles having established technological feasibility compared to the prior year.

General and administrative

General and administrative expenses increased by $331.4 for the fiscal year ended March 31, 2023, as compared to the prior year, due primarily to increases in (i) professional fees related to our acquisition and integration of Zynga, (ii) personnel expenses for additional headcount, including our acquisition of Zynga, (iii) higher rent expense for additional locations and lease renewals, including our acquisition of Zynga, and (iv) right-of-use asset impairment expense related to Zynga's San Francisco office (see Note 1 3 - Leases ).

General and administrative expenses decreased by $123.4 for the fiscal year ended March 31, 2024, as compared to the prior year period, due to a decrease in professional fees related to our acquisition and integration of Zynga, a right-of-use asset impairment expense related to Zynga's San Francisco office (see Note 13 - Leases ) in the prior year with no corresponding expense in the current year, a reduction of expense in the current year as compared to the prior year related to updating the fair value of contingent earn-out liability related to our acquisition of Nordeus, and a decrease in the fair value of the contingent earn-out liability related to our acquisition of Popcore.

These decreases were partially offset by an increase in personnel expense due to increased headcount as well as an increase in IT-related expenses for cloud-based services and IT infrastructure.

General and administrative expenses for the fiscal years ended March 31, 2024 and 2023 include occupancy expense (primarily rent, utilities and office expenses) of $69.9 and $66.8, respectively, related to our development studios.

Depreciation and amortization

Depreciation and amortization expenses increased by $61.2 for the fiscal year ended March 31, 2023, as compared to the prior year, due primarily to acquired intangible assets and depreciation expense related to Zynga.

Depreciation and amortization expenses increased by $48.9 for the fiscal year ended March 31, 2024, as compared to the prior year period, due primarily to leasehold improvements for office buildouts, acquired intangible assets, and depreciation expense related to Zynga.

Goodwill impairment

Goodwill impairment expense was $2,342.1 for the fiscal year ended March 31, 2024 due to a partial impairment recognized related to one of our reporting units (refer to Note 9 - Goodwill and Intangible Assets, Net ), with no corresponding expense in the prior year.

Business reorganization

Business reorganization expense increased by $90.0 for the fiscal year ended March 31, 2024, as compared to the prior year period, due primarily to titles cancelled as part of our approved cost reduction program.

Interest and other, net

(millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease)

2024 % of net revenue 2023 % of net revenue Increase/(decrease) % Increase/(decrease)

Interest income $ 62.3 1.2 % $ 33.8 0.6 % $ 28.5 84.3 %

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Interest and other, net was expense of $103.6 for the fiscal year ended March 31, 2024, as compared to $141.9 for the fiscal year ended March 31, 2023.

The increase in expense was due primarily to interest expense related to our Senior Notes,

Term Loan, 2022 Credit Agreement, and an unsecured bridge loan facility related to our acquisition of Zynga, including the amortization of related deferred costs, in connection with our acquisition of Zynga (refer to Note 11 - Debt and Note 20 - Acquisitions ) and foreign currency losses.

Gain/(loss) on long-term investments, net

Gain/(loss) on long-term investments, net for the fiscal year ended March 31, 2023 was a loss of $31.0 compared to a gain of $6.0 in the prior year period.

The change was due primarily to a loss relating to our Convertible Notes, partially offset by a gain related to our Capped Calls, both as result of our Zynga Acquisition (refer to Note 11 - Debt and Note 20 - Acquisitions ).

The net decrease was due primarily to an increase in interest income primarily due to increases in interest rates, a gain on debt extinguishment recognized on the partial repayment of our 2024 Notes, a decrease in interest expense related to our bridge loan commitment in connection with our acquisition of Zynga in the prior year, and a decrease in foreign currency losses.

These decreases in expense were partially offset by an increase in interest expense related to our debt transactions (refer to Note 11 - Debt ).

Loss on fair value adjustments, net

Loss on fair value adjustments, net for the fiscal year ended March 31, 2024 was a loss of $8.6 compared to a loss of $31.0 in the prior year period.

The change was due primarily to a prior year loss for the increase in fair value of our Convertible Notes, partially offset by a prior year gain related to our Capped Calls, both as result of our Zynga Acquisition (refer to Note 11 - Debt and Note 20 - Acquisitions ).

Provision for income taxes

Our benefit from income taxes was $213.4 for the fiscal year ended March 31, 2023 as compared to income tax expense of $47.4 for the fiscal year ended March 31, 2022.

Our income tax expense was $41.4 for the fiscal year ended March 31, 2024 as compared to a benefit from income taxes of $213.4 for the fiscal year ended March 31, 2023.

When compared to the statutory rate of 21%, the effective tax rate of (1.1)% for the fiscal year ended March 31, 2024 was due primarily to an expense of $474.7 from nondeductible goodwill impairments, $337.2 from an increase in the U.S.

valuation allowance expense, $41.6 from an increase in the foreign valuation allowance expense, $39.0 from our geographic mix and foreign earnings, and $29.2 from a decrease in the net deferred tax asset relating to the Swiss cantonal basis step-up (as noted below) partially offset by a $63.3 benefit from tax credits anticipated to be utilized and $32.7 benefit from changes in reserves due to statute lapses.

When compared to the statutory rate of 21%, the effective tax rate of 15.9% for the fiscal year ended March 31, 2023 was due primarily to an expense of $84.0 from an increase in the U.S.

valuation allowance, expense of $39.7 from our geographic mix and foreign earnings, and $20.2 nondeductible expense relating to compensation expense related to covered employees pursuant to Section 162(m) and loss on the redemption of convertible debt, partially offset by a $76.8 benefit from tax credits anticipated to be utilized.

When compared to the statutory rate of 21%, the effective tax rate of 10.2% for the fiscal year ended March 31, 2022 was due primarily to a $30.9 benefit from tax credits anticipated to be utilized, $14.6 in excess tax benefits from employee stock compensation, an $11.6 benefit due to an increase to the net deferred tax asset that arose from a step up in tax basis related to the Federal Act on Tax Reform and AVH (Old-Age and Survivors Insurance) Financing ("TRAF") enacted in Switzerland, discussed below, and an $8.0 benefit from our geographic mix of earnings, partially offset by a $10.1 nondeductible expense due to an increase in fair value of the contingent consideration liability associated with the acquisition of Nordeus.

The effective tax rate in the current year was higher compared to the prior year primarily due to increased benefits from tax credits and reduced benefits from excess tax benefits from employee stock compensation, partially offset by increased expense related to an increase in our valuation allowance, increased expense from nondeductible costs, and the impact of geographic mix and foreign earnings.

The effective tax rate in the current year was lower compared to the prior year primarily due to increased expense from nondeductible goodwill impairments, increased expense related to an increase in our valuation allowance, decreased benefits from tax credits, and the impact of geographic mix and foreign earnings.

The accounting for share-based compensation will increase or decrease our effective tax rate based upon the difference between our share-based compensation expense and the deductions taken on our tax return, which depends on the stock price at the time of the employee award vesting.

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

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.

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.

Section 174 capitalization increased the income tax payable by $46.7 and deferred tax assets by $128.9.

The American Rescue Plan Act of 2021 (“ARPA”), among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations.

Effective for tax years starting after December 31, 2026 (April 1, 2027 for the Company), the ARPA expands the limitation to cover the next five most highly compensated employees.

The ARPA did not have a material impact on our Consolidated Financial Statements for the fiscal year ended March 31, 2023.

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

The American Rescue Plan Act of 2021 (the “ARPA”), among other things, includes provisions to expand the IRC Section 162(m) disallowance for deduction of certain compensation paid by publicly held corporations.

Effective for tax years starting after December 31, 2026 (April 1, 2027 for the Company), ARPA expands the limitation to cover the next five most highly compensated employees.

ARPA did not have a material impact on our Consolidated Financial Statements for the fiscal year ended March 31, 2024.

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

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 the taxable year ending

March 31, 2024.

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

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

We estimate no tax liability relating to the 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.

On May 19, 2019, a public referendum held in Switzerland approved the TRAF, which was effective for us on January 1, 2020.

The TRAF abolished preferential tax regimes for holding companies, domicile companies, and mixed companies at the cantonal level.

The Organization for Economic Co-operation and Development (”OECD”) has proposed a global minimum tax of 15% of reported profits, referred to as Pillar Two.

Many countries have already implemented or are taking steps to implement Pillar Two.

Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly differently than the model rules and on different timelines.

Many aspects of Pillar Two are effective for the fiscal year ending March 31, 2025.

It is possible that Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than the 15% minimum rate.

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

Switzerland's Federal Act on Tax Reform and AVH Financing ("TRAF") abolished preferential tax regimes for holding companies, domicile companies, and mixed companies at the cantonal level.

The TRAF allows the cantons to establish transition rules, the implementation of which may be subject to a ruling from the canton.

For the fiscal year ended March 31, 2023, we recorded a net tax benefit of $5.7 due to an increase of the deferred tax asset of $20.6, offset by an increase in the valuation of allowance of $14.9, as it is more-likely-than-not that such deferred tax assets would be realized.

For the fiscal year ended March 31, 2024, we recorded a net tax expense of $29.2 due to an increase in the valuation of allowance of $81.3 offset by an increase in the deferred tax asset of $52.1 relating to the Swiss cantonal basis step-up, as it is more-likely-than-not that such deferred tax assets would not be realized.

As of March 31, 2024, we had gross unrecognized tax benefits, including interest and penalties, of $276.3, of which $167.9 would affect our effective tax rate if realized.

For the fiscal year ended March 31, 2023, gross unrecognized tax benefits increased by $118.8.

For the fiscal year ended March 31, 2024, gross unrecognized tax benefits decreased by $18.5.

We are no longer subject to audit for U.S.

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Certain taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2016 through March 31, 2022.

Net (loss) income and (loss) earnings per share

For the fiscal year ended March 31, 2023, our Net loss was $1,124.7, as compared to income of $418.0 in the prior year.

Diluted loss per share for the fiscal year ended March 31, 2023 was $7.03, as compared to diluted earnings per share of $3.58 for the fiscal year ended March 31, 2022.

Basic weighted average shares of 159.9 were 43.1 higher due primarily to stock issued as consideration for the Zynga Acquisition and for the conversion of Convertible Notes.

See Note 12 - (Loss) Earnings P er Share to our Consolidated Financial Statements for additional information.

Net loss and loss per share

For the fiscal year ended March 31, 2024, net loss was $3,744.2, as compared to a net loss of $1,124.7 in the prior year.

Basic and diluted loss per share for the fiscal year ended March 31, 2024 was $22.01, as compared to basic and diluted loss per share of $7.03 for the fiscal year ended March 31, 2023.

Basic weighted average shares of 170.1 were 10.2 higher due primarily to normal stock compensation activity, including vests as well as grants and forfeitures in the prior year being fully outstanding in the current year.

See Note 12 - (Loss) Earnings Per Share to our Consolidated Financial Statements for additional information.

Liquidity and Capital Resources

Our primary cash requirements are to fund (i) the development, manufacturing and marketing of our published products, (ii) working capital, (iii) capital expenditures, (iv) debt and interest payments, (v) acquisitions, and (vi) tax payments.

We expect to rely on cash and cash equivalents as well as on short-term investments, funds provided by our operating activities, and our 2022 Credit Agreement to satisfy our working capital needs.

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Short-term Investments

As of March 31, 2023, we had $187.0 of short-term investments, which are readily marketable in nature and represent an investment of cash that is available for current operations.

From time to time, we may purchase additional short-term investments depending on future market conditions and liquidity needs.

As of March 31, 2023, based on the composition of our investment portfolio and actions taken in recent months by central banks around the world, including the U.S.

Federal Reserve, in response to the rising inflation and related adverse economic conditions, we anticipate investment yields may increase, which could increase our future interest income.

Such impact is not expected to be material to our liquidity.

The Senior Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee.

As of March 31, 2024, we had $22.0 of short-term investments, which primarily consisted of bank time deposits with maturities greater than 90 days.

From time to time, we may place additional short-term investments depending on future market conditions and liquidity needs.

The additional 2026 Notes and additional 2028 Notes (the “New Notes”) were issued as additional notes under the existing Indenture (refer to Note 11 - Debt ).

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

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

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

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

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

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

During the fiscal year ended March 31, 2023, we made interest payments of $31.5.

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.

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 fiscal year ended March 31, 2024, we made interest payments of $135.2.

The proceeds from the issuance of the Senior Notes were used to finance a portion of our acquisition of Zynga.

The 2026 Notes mature on March 28, 2026 and bear interest at an annual rate of 5.000%.

The 2028 Notes mature on March 28, 2028 and bear interest at an annual rate of 4.950%.

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

The 2026 Notes and 2028 Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee.

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

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.

Subject to market conditions, we currently intend to refinance the 2025 Notes prior to maturity.

On June 5, 2023, pursuant to a tender offer, we purchased and retired $650.0 in aggregate principal amount of our 2024 Notes, with proceeds received from the 2026 Notes and 2028 Notes.

We repaid the remaining $350.0 of principal amount of our 2024 Notes on its maturity date on March 28, 2024, with proceeds received from the New Notes.

Credit Agreement

On May 23, 2022, we entered into a new unsecured Credit Agreement (the "2022 Credit Agreement"), which replaced in its entirety the Company's prior Credit Agreement, dated as of February 8, 2019, which was paid off in full and terminated.

On May 23, 2022, we entered into an unsecured Credit Agreement (as amended, the "2022 Credit Agreement"), which replaced in its entirety the Company's prior Credit Agreement, dated as of February 8, 2019, which was paid off in full and terminated.

The 2022 Credit Agreement provides for an unsecured five-year revolving credit facility with commitments of $500.0, including sublimits for (i) the issuance of letters of credit in an aggregate face amount of up to $100.0 and (ii) borrowings and letters of credit denominated in Pounds Sterling, Euros, and Canadian Dollars in an aggregate principal amount of up to $100.0.

On May 16, 2024, we increased the total commitments under the facility to $750.0 pursuant to the 2022 Credit Agreement's incremental provisions, leaving no further uncommitted incremental capacity.

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 March 31, 2024) or (b) 1.000% to 1.625% above Secured Overnight Financing Rate ("SOFR"), approximately 5.33% at March 31, 2024, which rates are determined by the Company's credit rating.

On June 22, 2022, we drew down $200.0 at approximately 3.28% from our facility under the 2022 Credit Agreement.

The proceeds were used to finance a portion of the repurchase of the Convertible Notes.

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

As of March 31, 2024, there were no borrowings under the 2022 Credit Agreement, and we had approximately $497.7 available for additional borrowings.

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).

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

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 (refer to Note 11 - Debt ).

In April 2023, we fully repaid the $350.0 Term Loan.

Convertible Notes

In conjunction with the acquisition of Zynga on May 23, 2022 (refer to Note 20 - 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 “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.

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.

The 2024 Convertible Notes and 2026 Convertible Notes mature on June 1, 2024, and December 15, 2026, respectively, unless earlier converted, redeemed, or repurchased in accordance with their terms, respectively, prior to the maturity date.

Interest is payable semiannually on the 2024 Convertible Notes in arrears on March 1 and September 1 of each year.

The 2026 Convertible Notes do not bear regular interest, and the principal amount does not accrete.

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, 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.

As of the expiration of the Fundamental Change, Make-Whole Fundamental Change, and Share Exchange Event, (a) $0.3 aggregate principal amount of the 2024 Convertible Notes and (b) $845.1 aggregate principal amount of the 2026 Convertible Notes were tendered for cash.

In addition, (a) $668.3 aggregate principal amount of the 2024 Convertible Notes, and (b) no 2026 Convertible Notes were surrendered for conversion into the applicable Reference Property.

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 March 31, 2024.

Financial Condition

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We do not hold any collateral to secure payment from customers.

We have trade credit insurance on the majority of customers who sell our physical products to mitigate accounts receivable risk.

We have trade credit insurance on the majority of our customers to mitigate accounts receivable risk.

A majority of our trade receivables are derived from sales to major retailers, including digital storefronts and platform partners, and distributors.

Our five largest customers accounted for 79.6%, 79.0%, and 78.4% of net revenue during the fiscal

years ended March 31, 2023, 2022, and 2021, respectively.

As of March 31, 2023 and 2022, five customers accounted for 61.1% and 72.8% of our gross accounts receivable, respectively.

Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 50.3% and 63.8% of such balances at March 31, 2023 and 2022, respectively.

We had three customers who accounted for 21.6%, 14.5%, and 14.2% of our gross accounts receivable as of March 31, 2023 and two customers who accounted for 43.5%, and 20.3% of our gross accounts receivable as of March 31, 2022.

Our five largest customers accounted for 79.8%, 79.6% and 79.0% of net revenue during the fiscal years ended March 31, 2024, 2023 and 2022, respectively.

As of March 31, 2024, and 2023, five customers comprised 69.9% and 61.1% of our gross accounts receivable, respectively, with our significant customers (those that individually comprised more than 10% of our gross accounts receivable balance) accounting for 57.7% and 50.3% of such balance at March 31, 2024, and 2023, respectively.

We had three customers who accounted for 21.8%, 18.1%, and 16.9% of our gross accounts receivable as of March 31, 2024, and three customers who accounted for 21.6%, 14.5%, and 14.2% of our gross accounts receivable as of March 31, 2023.

We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2024, and 2023.

Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers who sell our physical products and our past collection experience, we believe that the receivable balances from these largest customers do not represent a significant credit risk, although we actively monitor each customer's creditworthiness and economic conditions that may affect our customers' business and access to capital.

We are monitoring the current global economic conditions, including credit markets and other factors as it relates to our customers in order to manage the risk of uncollectible accounts receivable, including as a result of the COVID-19 pandemic.

We are monitoring the current global economic conditions, including credit markets and other factors as it relates to our customers in order to manage the risk of uncollectible accounts receivable.

We believe that our current cash and cash equivalents, short-term investments, and projected cash flow from operations, along with availability under our 2022 Credit Agreement will provide us with sufficient liquidity to satisfy our cash requirements for working capital, capital expenditures, and commitments on both a short-term and long-term basis.

Our liquidity and capital resources have not been materially affected by the COVID-19 pandemic and related volatility and slowdown in the global financial markets to date.

For further discussion regarding the potential future impacts of the COVID-19 pandemic and related economic conditions on our business, refer to Item 1A, Risk Factors .

As of March 31, 2024, the amount of cash and cash equivalents held outside of the U.S.

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These balances are dispersed across various locations around the world.

We believe that such dispersion meets the business and liquidity needs of our foreign affiliates.

We believe that such dispersion meets the

business and liquidity needs of our foreign affiliates.

In addition, we expect to have the ability to generate sufficient cash domestically to support ongoing operations for the foreseeable future.

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Fiscal Year Ended March 31,

(millions of dollars) 2023 2022 2021

Net cash provided by operating activities $ 1.1 $ 258.0 $ 912.3

2024 2023 2022

Net cash (used in) provided by operating activities $ (16.1) $ 1.1 $ 258.0

Net cash (used in) provided by investing activities (28.2) (2,876.3) 139.2

Net cash provided by (used in) financing activities 1,930.3 (256.8) (57.4)

Net cash (used in) provided by financing activities (91.4) 1,930.3 (256.8)

Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash and cash equivalents 3.1 (15.9) (5.2)

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At March 31, 2024, we had $1,102.0 of Cash, cash equivalents, and restricted cash and cash equivalents, compared to $1,234.6 at March 31, 2023.

The decrease was due to Net cash used in investing activities primarily related to our Zynga Acquisition (refer to Note 20 - Acquisitions ).

This net decrease was partially offset by Net cash provided by financing activities (refer to Note 11 - Debt ), primarily related to proceeds from the issuance of Senior Notes and draw-downs on our Term Loan, which were partially offset by payments for Convertible Notes that were part of our Zynga Acquisition.

To a lesser extent, the net decrease was also partially offset by Net cash provided by operating activities from sales of our products, partially offset by working capital requirements used in the development, sale, and support of our products, including for personnel, as well as payments for interest on our debt and transaction-related costs related to our Zynga Acquisition.

The debt activity included proceeds from the issuance of 2026 Notes and 2028 Notes offset by our repayment of 2024 Notes and Term Loan (refer to Note 11 - Debt ).

To a lesser extent, the decrease was also due to i) Net cash used in investing activities which was due primarily to the purchase of fixed assets and our immaterial acquisitions and investments, offset by our sales and maturities of available for sale securities, and ii) Net cash used in operating activities, which was due primarily to investments in software development and licenses, partially offset by sales of our products.

Refer to Note 14 - Commitments and Contingencies to our Consolidated Financial Statements for disclosures regarding our commitments.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis