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What changed in Take-Two Interactive's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Take-Two Interactive's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+434 added−401 removedSource: 10-K (2024-05-22) vs 10-K (2023-05-26)

Top changes in Take-Two Interactive's 2024 10-K

434 paragraphs added · 401 removed · 303 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe expect 2K to continue to develop new, successful franchises in the future. 2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock , Mafia , Sid Meier's Civilization , and XCOM franchises. 2K also publishes externally developed franchises such as Borderlands and Tiny Tina's Wonderlands . 2K's realistic sports simulation titles include our flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestling series, and PGA TOUR 2K .
Biggest changeWe expect 2K to continue to develop new, successful franchises in the future. 2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock , Mafia , Sid Meier's Civilization , and XCOM franchises. 2K also has long-held publishing rights for Borderlands and Tiny Tina's Wonderlands from Gearbox.
We continue to engage in evolving business models such as online gaming, virtual currency, add-on content, and in-game purchases, and we expect to continue to generate incremental revenue from these opportunities. We also generate revenue from advertising within our software products. Rockstar Games.
We engage in evolving business models such as online gaming, virtual currency, add-on content, and in-game purchases, and we expect to continue to generate incremental revenue from these opportunities. We also generate revenue from advertising within our software products. Rockstar Games.
Examples of our competitors include Activision Blizzard, Inc., Electronic Arts Inc., Embracer Group AB, Playrix, Playtika, Roblox, Scopely, Tencent, and Ubisoft Entertainment S.A. We also expect new competitors to enter the market and existing competitors to allocate more resources to develop and market competing games and applications. • Sony, Microsoft, and Nintendo for the sale of interactive entertainment software.
Examples of our competitors include Activision Blizzard, Electronic Arts Inc., Embracer Group AB, Playrix, Playtika, Roblox, Scopely, Tencent, and Ubisoft Entertainment S.A. We also expect new competitors to enter the market and existing competitors to allocate more resources to develop and market competing games and applications. • Sony, Microsoft, and Nintendo for the sale of interactive entertainment software.
We also provide a comprehensive benefits package that includes traditional offerings, such as medical, dental vision, retirement, disability, accident and life insurance, prescription drugs, and leaves, and also includes programs such as well-being, 7 fitness reimbursement, mental health benefits, mental health awareness training for Human Resources personnel and managers throughout the Company, and charitable giving with a company match.
We also provide a comprehensive benefits package that includes traditional offerings, such as medical, dental vision, retirement, disability, accident and life insurance, prescription drugs, and leaves, and also includes programs such as well-being, fitness reimbursement, mental health benefits, mental health awareness training for Human Resources personnel and managers throughout the Company, and charitable giving with a company match. 7
Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development and marketing costs. We have internal development studios located in Australia, Canada, China, Czech Republic, Finland, Germany, Hungary, India, Serbia, South Korea, Spain, Turkey, the United Kingdom (U.K.), and the United States (U.S.).
Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development and marketing costs. We have 2 internal development studios located in Australia, Canada, China, Czech Republic, Finland, Germany, Hungary, India, Serbia, South Korea, Spain, Turkey, the United Kingdom (U.K.), and the United States (U.S.).
Sales We sell software titles both digitally and physically through direct relationships with digital storefronts and platform partners, large retail customers, and third-party distributors. We sell our products globally and have sales operations in Australia, Canada, France, Germany, Japan, the Netherlands, Singapore, South Korea, Spain, Taiwan, the United Kingdom, and the United States.
Sales We sell software titles both digitally and physically through direct relationships with digital storefronts and platform partners, large retail customers, and third-party distributors. We sell our products globally and have sales operations in Australia, Canada, France, Germany, Japan, Singapore, South Korea, Spain, Taiwan, the United Kingdom, and the United States.
Another cornerstone of our strategy is to support the success of our products in the marketplace through innovative marketing programs and global distribution on platforms and through channels that are relevant to our target audience. Support World-Class Creative Teams. Creativity and innovation remain two of the core tenets of our organization and are the lifeblood of our ongoing success.
Another cornerstone of our strategy is to support the success of our products in the 1 marketplace through innovative marketing programs and global distribution on platforms and through channels that are relevant to our target audience. Support World-Class Creative Teams. Creativity and innovation remain two of the core tenets of our organization and are the lifeblood of our ongoing success.
Our first such title, NBA 2K Online , a free-to-play NBA simulation game based on the console edition of NBA 2K , 2 which was co-developed by 2K and Tencent, is the top online PC sports game in China with over 60 million registered users.
Our first such title, NBA 2K Online , a free-to-play NBA simulation game based on the console edition of NBA 2K , which was co-developed by 2K and Tencent, is the top online PC sports game in China with over 60 million registered users.
In addition, we were included on Fortune’s Great Places to Work list in 2020, 2021, and 2022 and were recently honored by Gay Gaming Professionals in 2021 as a DEI&B leader in the interactive entertainment industry. Compensation and Benefits.
In addition, we were included on Fortune’s Great Places to Work list in 2020, 2021, and 2022 and were honored by Gay Gaming Professionals in 2021 as a DEI&B leader in the interactive entertainment industry. Compensation and Benefits.
We believe that we label and market our products in accordance with the applicable principles and guidelines of the Entertainment Software Rating Board, ("ESRB"), an independent self-regulatory body that assigns ratings and enforces advertising guidelines for the interactive software industry. • Stimulating continued sales by reducing the wholesale prices of our products to retailers, digital storefronts, and platform providers at various times during the life of a product.
We aim to label and market our products in accordance with the applicable principles and guidelines of the Entertainment Software Rating Board, ("ESRB"), an independent self-regulatory body that assigns ratings and enforces advertising guidelines for the interactive software industry. • Stimulating continued sales by reducing the wholesale prices of our products to retailers, digital storefronts, and platform providers at various times during the life of a product.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to build on our licensing relationships and also broaden the distribution of our existing products and expand our online gaming presence, especially in China and South Korea. 2K has secured a multi-year license from the NBA to develop an online version of our NBA simulation game in China, Taiwan, Hong Kong, and Macau.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to build on our licensing relationships and also broaden the distribution of our existing products and expand our online gaming presence, especially in China. 2K has secured a multi-year license from the NBA to develop an online version of our NBA simulation game in China, Taiwan, Hong Kong, and Macau.
We support our creative and corporate teams by focusing on talent acquisition and retention, including through offering job development and skills training initiatives, extensive employee benefits and numerous well-being programs, and partnering with the leadership at our labels to foster the types of cultures our leaders believe best support and grow the creative processes for their particular teams.
We support our creative and corporate teams by focusing on talent acquisition and retention, including through offering job development and skills training initiatives, extensive employee benefits and numerous well-being programs, and partnering with the leadership at our labels to foster the types of cultures our leaders believe best support and grow the creative processes for their particular teams. 6 Sustainability.
Competition in the entertainment software industry is based on innovation, features, playability, product quality, brand name recognition, compatibility with popular platforms, access to distribution channels, price, marketing, and customer service. Our business is driven by hit titles, which require increasing budgets for development and marketing.
Competition in the interactive entertainment industry is based on innovation, features, playability, product quality, brand name recognition, compatibility with popular platforms, access to distribution channels, price, marketing, and customer service. Our business is driven by hit titles, which require increasing budgets for development and marketing.
We also distribute our titles, add-on content, and in-game purchases through direct digital download to consoles, PCs, and mobile devices.
We distribute our titles, add-on content, and in-game purchases through direct digital download to consoles, PCs, and mobile devices.
We believe that Rockstar Games has established a uniquely original, popular, cultural phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry's most iconic and critically acclaimed brand and has sold-in over 395 million units worldwide.
We believe that Rockstar Games has established a uniquely original, popular, cultural phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry's most iconic and critically acclaimed brand and has sold-in over 420 million units worldwide.
The term of the agreement, as amended, expires on March 31, 2024, with automatic one-year renewal terms thereafter (unless one party gives the other notice of termination). Sony may terminate the agreement for any or no reason upon 30 days’ notice.
The term of the agreement, as amended, expires on March 31, 2025, with automatic one-year renewal terms thereafter (unless one party gives the other notice of termination). Sony may terminate the agreement for any or no reason upon 30 days’ notice.
We view digital distribution as an important growth opportunity for our industry and Company; however, we expect that packaged goods and traditional retailers will continue to be an important channel for the sale of our console products for the foreseeable future, particularly in connection with the release of certain titles for consoles or certain regions where digital distribution is not as well established.
We view digital distribution as the principal channel for our industry and Company; however, we expect that packaged goods and traditional retailers will continue to be an important channel for the sale of our console products for the foreseeable future, particularly in connection with the release of certain titles for consoles or certain regions where digital distribution is not as well established.
General We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, Private Division, and Zynga. Our products are currently designed for console gaming systems, including, but not limited to, the Sony Computer Entertainment, Inc.
Item 1. Business General We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, Private Division, and Zynga. Our products are currently designed for console gaming systems, including, but not limited to, the Sony Computer Entertainment, Inc.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online gaming presence, especially in China and South Korea.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online gaming presence, especially in China.
We believe ESG creates value for all stakeholders, employees and customers while also helping to mitigate risks, reduce costs, protect brand value, and identify market opportunities. We have an organization-wide ESG committee, overseen by the Board of Directors, to lead our ESG efforts.
We believe Sustainability creates value for all stakeholders, including employees and customers, while also helping to mitigate risks, reduce costs, protect brand value, and identify market opportunities. We have an organization-wide Sustainability committee, overseen by the Board of Directors, to lead our Sustainability efforts.
Competition for our titles is influenced by the timing of competitive product releases and the similarity of such products to our titles. International Operations International sales are a significant part of our business. For the fiscal years ended March 31, 2023, 2022 and 2021, we earned 37.2%, 40.1% and 40.2%, respectively, of our net revenue outside the United States.
Competition for our titles is influenced by the timing of competitive product releases and the similarity of such products to our titles. International Operations International sales are a significant part of our business. For the fiscal years ended March 31, 2024, 2023 and 2022, we earned 38.7%, 37.2% and 40.1%, respectively, of our net revenue outside the United States.
We have 8,894 employees working in game development in studios around the world, including some of the most well-known names in the business. The creative teams at Rockstar Games, 2K, Private Division, and Zynga are renowned for their consistent ability to deliver games that set new benchmarks for excellence.
We have 9,639 employees working in game development in studios around the world, including some of the most well-known names in the business. The creative teams at Rockstar Games, 2K, Private Division, and Zynga are renowned for their consistent ability to deliver games that set new benchmarks for excellence.
We are dependent on a limited number of customers that account for a significant portion of our sales. Sales to our five largest customers during the fiscal year ended March 31, 2023, accounted for 79.6% of our net revenue, with Sony, Google, Apple, and Microsoft each accounting for more than 10.0% of our net revenue.
We are dependent on a limited number of customers that account for a significant portion of our sales. Sales to our five largest customers during the fiscal year ended March 31, 2024, accounted for 79.8% of our net revenue, with Sony, Apple, Google, and Microsoft each accounting for more than 10.0% of our net revenue.
In that vein, we are continuing existing programs and identifying others to ensure our people feel supported in their roles, including enhanced manager training to help strengthen teams despite the varied approaches to working, broadening our wellness and mental health offerings, encouraging people to step away from their screens when they can and spending a lot of time listening to employee feedback and encouraging employees to collaborate in person where appropriate and effective.
In that vein, we are continuing existing programs and identifying others to ensure our people feel supported in their roles, including enhanced manager training to help strengthen teams despite the varied approaches to working, broadening our wellness and mental health offerings, encouraging people to step away from their screens when they can and spending a lot of time listening to employee feedback.
The competition is intense among an increasing number of newly introduced entertainment software titles and hardware for adequate levels of shelf space and promotional support. • Other forms of entertainment such as motion pictures, television, social networking, online computer applications, and other forms of entertainment, which may be less expensive or provide other advantages to consumers.
The competition for shelf space, whether physical or virtual, and promotional support is intense among an increasing number of newly introduced entertainment software titles and hardware. • Other forms of entertainment such as motion pictures, television, social networking, online applications, and other forms of entertainment, which may be less expensive or provide other advantages to consumers.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including the Company) file electronically with the SEC.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including the Company) file electronically with the SEC. The SEC's website is www.sec.gov . Strategy Overview.
Through this committee, we developed a comprehensive, five-pillar ESG framework that reflects our top priority issues and stakeholder needs. In 2022, we made significant progress in managing our ESG performance. We are dedicated to driving positive change across our industry and society through our ESG efforts. Diversity, Equity, and Inclusion.
Through this committee, we developed a comprehensive, Sustainability framework that reflects our top priority issues and stakeholder needs. In 2023, we made significant progress in managing our Sustainability performance. We are dedicated to driving positive change across our industry and society through our Sustainability efforts. Diversity, Equity, and Inclusion.
Environmental, Social, and Governance (ESG). We recognize the synergies between corporate citizenship and smart business and are committed to focusing on, and measuring, the impact of our ESG activities, which are rooted in our core tenets of creativity, innovation, and efficiency.
We recognize the synergies between corporate citizenship and smart business and are committed to focusing on, and measuring, the impact of our Sustainability activities, which are rooted in our core tenets of creativity, innovation, and efficiency.
The SEC's website is www.sec.gov . 1 Strategy Overview. Our strategy is to be the most creative, innovative, and efficient company in the evolving interactive entertainment industry. With our diverse portfolio that spans all key platforms and numerous genres, we strive to create the highest quality, most engaging interactive entertainment franchises and captivate our global audience.
Our strategy is to be the most creative, innovative, and efficient company in the evolving interactive entertainment industry. With our diverse portfolio that spans all key platforms and numerous genres, we strive to create the highest quality, most engaging interactive entertainment franchises and captivate our global audience.
As of March 31, 2023, we had a research and development staff of 8,894 employees with the technical capabilities to develop software titles for all major consoles, PCs, and mobile platforms in multiple languages and territories.
As of March 31, 2024, we had a research and development staff of 9,639 employees with the technical capabilities to develop software titles for all major consoles, PCs, and mobile platforms in multiple languages and territories.
Our hybrid approach to the workplace, where appropriate, enables our continued focus on creativity and innovation as two of the core tenets of our organization and the lifeblood of our ongoing success. The creative teams at our labels are 6 renowned for their consistent ability to deliver games that set new benchmarks for excellence.
Our varying approaches to the workplace, facilitate our continued focus on creativity and innovation as two of the core tenets of our organization and the lifeblood of our ongoing success. The creative teams at our labels are renowned for their consistent ability to deliver games that set new benchmarks for excellence.
We believe that our commitment to creativity and innovation is a distinguishing strength, enabling us to differentiate our products in the marketplace by combining advanced technology with compelling storylines and characters that provide unique gameplay experiences for consumers.
We believe that our player-first mentality and commitment to creativity and innovation are distinguishing strengths, enabling us to differentiate our products in the marketplace by combining advanced technology with compelling storylines and characters that provide unique gameplay experiences for consumers.
Zynga's diverse portfolio of popular game franchises has been downloaded more than 6 billion times, including CSR Racing , Dragon City , Empires & Puzzles , FarmVille , Golf Rival , Harry Potter: Puzzles & Spells , Merge Dragons , Merge Magic , Monster Legends , Toon Blast , Top Eleven , Toy Blast , Two Dots , Words With Friends , Zynga Poker , and a high volume of hyper-casual mobile titles, including Fill the Fridge!, Parking Jam 3D , Pressure Washing Run , and Pull the Pin .
Zynga's diverse portfolio of popular game franchises has been downloaded more than six billion times, including CSR Racing , Dragon City , Empires & Puzzles , FarmVille , Golf Rival , Harry Potter: Puzzles & Spells , Match Factory! , Merge Dragons! , Merge Magic! , Monster Legends , Toon Blast , Top Eleven , Top Troops , Toy Blast , Two Dots , Words With Friends , Zynga Poker , and a high volume of hyper-casual mobile titles, including Fill the Fridge!, Parking Jam 3D , Power Slap , Pull the Pin, Twisted Tangle, and Tangled Snakes . 3 Recent Developments Pending Acquisition.
With 11,580 full-time employees as of March 31, 2023, of which 7,064 were employed outside of the United States, we are constantly focused on our teams – their success, their structure, and how best to support them given their particular needs and projects. 46% of our employees are located in North America, 37% in Europe, and 17% in the Asia-Pacific region; 77% of our employees are focused on product development.
With 12,371 full-time employees as of March 31, 2024, of which 7,621 were located outside of the United States, we are constantly focused on our teams – their success, their structure, and how best to support them given their particular needs and projects. 46% of our employees are located in North America, 36% in Europe, and 18% in the Asia-Pacific region; 78% of our employees are focused on product development.
Competition In our business, we compete with: • Other interactive entertainment companies, including those offering mobile games, that range in size and cost structure from very small with limited resources to very large with greater financial, marketing, technical, and other resources than ours.
As of March 31, 2024, we had a sales and marketing staff of 1,353 people. 5 Competition In our business, we compete with: • Other interactive entertainment companies, including those offering mobile games, that range in size and cost structure from very small with limited resources to very large with greater financial, marketing, technical, and other resources than ours.
We develop our products using a combination of our internal development teams and external development resources acting under contract with us. We typically select external developers based on their track record and expertise in developing products in the same category or genre.
This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles. We develop our products using a combination of our internal development teams and external development resources acting under contract with us. We select external developers based on their track record and expertise in developing products in the same category or genre.
The agreements require us to submit products to Microsoft for approval and to make royalty 4 payments to Microsoft based on the number of units manufactured or revenue from digitally downloaded content. In addition, products for the Xbox consoles are required to be manufactured by Microsoft-approved manufacturers.
The agreements require us to submit products to Microsoft for approval and to make royalty payments to Microsoft based on the number of units manufactured or revenue from digitally downloaded content.
Our advertising offerings include banner and interstitial advertisements, engagement advertisements and offers in which players can participate in watch-to-earn engagements or other offer engagements, branded virtual items and sponsorships that integrate relevant advertising and messaging within game play, and advertising networks through which we offer a unified advertising platform that includes a demand side platform and supply side platform, as well as mediation capabilities.
Our advertising offerings include banner and interstitial advertisements, engagement advertisements and offers in which players can participate in watch-to-earn engagements or other offer engagements, branded virtual items, and sponsorships that integrate relevant advertising and messaging within game play.
However, we also acquire our players through paid 5 advertising channels. We advertise our mobile games primarily within other mobile applications and on social networks, often through in-app and other advertising partners such as Facebook and Google. As of March 31, 2023, we had a sales and marketing staff of 1,336 people.
However, we also acquire our players through paid advertising channels. We advertise our mobile games primarily within other mobile applications and on social networks, often through in-app and other advertising partners such as Facebook and Google.
Our product investment review process includes reviews of each project at various stages of development by our executive management team and the senior management of our publishing labels and also includes coordination between our sales and marketing personnel before the launch of titles. This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles.
We apply this process to all of our products, whether internally or externally developed. Our product investment review process includes reviews of each project at various stages of development by our executive management team and the senior management of our publishing labels and also includes coordination between our sales and marketing personnel before the launch of titles.
The term of Xbox 360 Agreement expires on March 31, 2024, and the term of the Xbox Next Gen Agreement expires on March 31, 2024, each with automatic one-year renewal terms thereafter (unless one party gives the other advance notice of non-renewal).
The terms of both Xbox Agreements expire on March 31, 2025, each with automatic one-year renewal terms thereafter (unless one party gives the other advance notice of non-renewal).
Effective as of November 17, 2005, we entered into an Xbox 360 Publisher License Agreement with Microsoft for the Xbox 360 console (the “Xbox 360 Agreement”).
In addition, products for the Xbox consoles are required to be manufactured by Microsoft-approved manufacturers. 4 Effective as of November 17, 2005, we entered into an Xbox 360 Publisher License Agreement with Microsoft for the Xbox 360 console (the “Xbox 360 Agreement”).
We currently own the intellectual property rights to 44 proprietary brands. In addition, we selectively develop titles based on licensed properties, including sports leagues, and also publish externally developed titles.
We currently own the intellectual property rights to 48 proprietary brands. In addition, we selectively develop titles based on licensed properties, including sports leagues, and also publish externally developed titles. We take steps to optimize efficiency and effectiveness in our operations while also maintaining high standards of quality and customer satisfaction.
Zynga's strategy is to have numerous games in concept development and to determine which titles are best suited for soft launch and worldwide launch based on the achievement of various milestones and KPI thresholds.
Our Zynga label publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising. Zynga's strategy is to have numerous games in concept development and to determine which titles are best suited for soft launch and worldwide launch based on the achievement of various milestones and KPI thresholds.
We use a product investment review process to evaluate potential titles for investment, to review existing titles in development, and to assess titles after release by measuring their performance in the market and the return on our investment. We apply this process to all of our products, whether internally or externally developed.
Our objective is to achieve greater operating expense leverage as we grow our scale with the release of our eagerly-anticipated pipeline. We use a product investment review process to evaluate potential titles for investment, to review existing titles in development, and to assess titles after release by measuring their performance in the market and the return on our investment.
Rockstar Games confirmed that active development for the next entry in the Grand Theft Auto franchise is well underway with more details to be shared over time. Rockstar Games continues to expand on its established series by developing sequels, offering downloadable episodes, and additional content. Rockstar Games' titles are published across all key platforms, including mobile. 2K.
Rockstar Games continues to expand on its established series by developing sequels, offering downloadable episodes, and providing additional content. Rockstar Games' titles are published across all key platforms, including mobile. 2K.
Our 2K label has published a variety of popular entertainment properties across all key platforms and across a range of genres including shooter, action, role-playing, strategy, sports, and family/casual entertainment. In recent years, 2K has expanded its offerings to include several new franchises that are expected to diversify its slate of games and provide opportunities for sequels and post-launch monetization.
Our 2K label has published a variety of popular entertainment properties across all key platforms and across a range of genres including shooter, action, role-playing, strategy, sports, and family/casual entertainment.
We support our teams by focusing on talent acquisition and retention, and our label structure enables us to target distinct market sectors and opportunities. Focus on Core Strength of Producing High Quality Titles. We focus on publishing a number of high-quality titles based on internally owned and developed intellectual properties.
We support our teams by focusing on talent acquisition and retention, and we seek to foster an environment where people build long-term careers and do their best work. Focus on Core Strength of Producing High-Quality Titles. We focus on publishing high-quality titles based on internally owned and developed intellectual properties.
While the repercussions of COVID-19 continue to be felt across the industry, over the past year, more of our employees have returned to office, and we are supporting a hybrid work environment within many teams. This evolving approach to the workplace presents new challenges for managing teams and supporting employees.
Although some repercussions of COVID-19 remain across the industry, most of our employees have returned to their offices, with many of our teams productively working in a hybrid work environment. This approach to the workplace presents new challenges, as well as opportunities, for managing teams and supporting employees.
These efforts and more contributed to Take-Two being named one of The Wall Street Journal’s Best Managed US Companies in 2018, 2019, and 2020, and included in Forbes' Best Mid-Size Employers list in 2019, 2021, and 2022.
These efforts and more contributed to Take-Two being named one of Forbes' Best Mid-Size Employers list in 2019, 2021, 2022, and 2024, and one of Newsweek's America's Greatest Workplaces for Diversity, Women, LGBTQ+, and Job Starters in 2024.
Our most recent installment, Grand Theft Auto V , which was released in 2013, has sold-in over 180 million units worldwide and includes access to Grand Theft Auto Online . Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 50 million units worldwide to date.
The label released its first trailer for the title in December 2023 and will share more details over time. Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 60 million units worldwide to date.
Private Division. Our Private Division label is dedicated to bringing titles from the industry's leading creative talent to market and is the publisher, developer, and owner of Kerbal Space Program and OlliOlli World . Kerbal Space Program 2 was released for early access in fiscal year 2023.
We have expanded our relationship with the NBA through the NBA 2K League , a competitive eSports league jointly owned by us and the NBA. Private Division. Our Private Division label is dedicated to bringing titles from the industry's leading creative talent to market and is the publisher, developer, and owner of Kerbal Space Program and OlliOlli World . Zynga.
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Item 1. Business Recent Developments Zynga Acquisition. On May 23, 2022, we completed our acquisition of Zynga Inc. ("Zynga"), a global leader in interactive entertainment that develops, markets, and operates social games as live services played on mobile platforms, with a mission to connect the world through games. Refer to Note 2 0 - Acquisitions for additional information.
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Our most recent installment, Grand Theft Auto V , which was released in 2013, has sold-in over 195 million units worldwide and includes access to Grand Theft Auto Online . Rockstar Games continues to invest in the franchise and plans to release Grand Theft Auto VI in the Fall of calendar 2025.
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Also, in connection with the Zynga Acquisition, we entered into several debt transactions (refer to Note 11 - Debt ). Subsequent to our fiscal year end, in April 2023, we issued additional bonds and paid off our Term Loan (refer to Note 2 1 - Subseq uent Events ).
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In recent years, 2K has expanded its offerings to include several new franchises that are expected to enhance and diversify its slate of games and provide opportunities for sequels and additional content.
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In March 2020, 2K announced a multi-year partnership with the National Football League encompassing multiple future video games that will be non-simulation football game experiences. 2K also publishes mobile titles, including WWE SuperCard . We have expanded our relationship with the NBA through the NBA 2K League , a groundbreaking competitive gaming league jointly owned by us and the NBA.
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As set forth under "Recent Developments," below, on March 27, 2024, we entered into an agreement to purchase Gearbox, which is expected to close in first quarter of Fiscal 2025 and will bring these intellectual properties in-house. 2K's realistic sports simulation titles include our flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestling series, PGA TOUR 2K , and TopSpin 2K . 2K also publishes mobile titles, including WWE SuperCard .
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Private Division also previously released The Outer Worlds and Ancestors: The Humankind Odyssey . 3 Zynga. Our Zynga label, which includes our former T2 Mobile Games label (which included Socialpoint, Playdots, and Nordeus) publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising.
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On March 27, 2024, we entered into a Share Purchase Agreement to purchase 100% of the issued and outstanding capital stock of The Gearbox Entertainment Company, Inc. ("Gearbox"), from Embracer Group AB.
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Zynga is also an industry-leading next-generation platform with the ability to acquire new users, cross-promote games, apply live services content updates, and optimize programmatic advertising and yields at scale through Chartboost, its leading mobile advertising and monetization platform. Intellectual Property Our business is highly dependent on the creation, acquisition, licensing, and protection of intellectual property.
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The purchase price is $460.0, consisting of newly issued shares of Take-Two common stock, valued based on the volume weighted average closing price per share of our common stock on the Nasdaq Global Select Market for the five consecutive trading days ending on (and including) the trading day immediately preceding the closing date, subject to adjustments as defined in the Share Purchase Agreement.
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The transaction, which is currently anticipated to close during the first quarter in fiscal 2025, is subject to the satisfaction or waiver of customary closing conditions for both parties. Intellectual Property Our business is highly dependent on the creation, acquisition, licensing, and protection of intellectual property.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSummary of Risk Factors Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to: Risks relating to our business and industry • Results of operations may be impacted by COVID-19 • Our industry is highly competitive • Uncertainty of achieving market acceptance, delays or disruptions for our products may have an adverse effect • We face development risks and must adapt to changes in software technologies • Increased use of mobile devices for gaming will drive future growth of mobile gaming • Increased competition for retailer support could increase expenses • Our ability to develop successful products for current video game platforms • We require approval of hardware licensors to publish titles • Reliance on complex information technology systems and networks and potential adverse impact of security breaches • Potential adverse impact of inadequate consumer data protection • Dependence on key management and product development personnel • Attracting, managing, and retaining our talent is critical to our success • Offensive consumer-created content can harm our results of operations or reputation • We rely on software development arrangements with third parties • Increasing importance of digital sales and free-to-play games exposes us to the risks of that business model • We must compete for advertisements and offers that are incorporated into our free-to-play games • Our acquisitions and investments may not have the anticipated results • International operations risks • The loss of server capacity, lack of sufficient bandwidth, or connectivity issues could cause our business to suffer • Use of open-source software exposes us to risks • Our software is susceptible to errors • The continued ability to acquire and maintain license to intellectual property is key • We may experience fluctuations in the recurring portion of our business • Uncertainty of expansion into new products and services • We are dependent on the timing of our product releases • We are dependent on the future success of our Grand Theft Auto products and other “hit” titles • Adverse effects of price protection, returns, and used game sales • A limited number of customers account for a significant portion of our sales • Content policies could negatively affect sales • Entertainment Software Rating Board ratings for our products could negatively affect our ability to distribute and sell • The competitive position and value of our products could be adversely affected by unprotected intellectual property • We have a significant amount of outstanding debt • The value of our virtual items is highly dependent on how we manage the economies in our games • There is potential for unauthorized or fraudulent transactions of accounts and virtual items outside of our games 8 Risks related to legal or regulatory compliance • Government regulation of the internet can affect our business • Legislation could subject us to claims or otherwise harm our business • Failure to comply with laws and regulations, including data privacy, could harm our business • Adverse effect of alleged or actual infringement on the intellectual property rights of third parties Risks related to financial and economic condition • Provisions in our charter documents and debt agreements may impede or discourage a takeover • Adverse effects of changes in tax rates and additional tax liabilities • We are subject to risks and uncertainties of international trade, including foreign currency fluctuations • Potential adverse effects of existing or future accounting standards • Adverse effects of declines in consumer spending and changes in the economy General Risk Factors • Additional issuances of equity securities would cause dilution and could affect the market price of our common stock • We are subject to risks related to corporate and social responsibility and reputation • Climate change may have a long-term impact on our business • We may be adversely affected by the effects of inflation • We are and may become involved in legal proceedings that may result in adverse outcomes Risks relating to our business and industry Our results of operations may be materially adversely impacted by the coronavirus pandemic (COVID-19).
Biggest changeSummary of Risk Factors Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to: Risks relating to our business and industry • Our industry is highly competitive • Uncertainty of achieving market acceptance, delays or disruptions for our products may have an adverse effect • We face development risks and must adapt to changes in software technologies • The development and use of artificial intelligence into our products may present operational and reputational risks • Increased use of mobile devices for gaming will drive future growth of mobile gaming • Increased competition for retailer support could increase expenses • Our ability to develop successful products for current video game platforms • We require approval of hardware licensors to publish titles • Reliance on complex information technology systems and networks and potential adverse impact of security breaches • Potential adverse impact of inadequate consumer data protection • Dependence on key management and product development personnel • Attracting, managing, and retaining our talent is critical to our success • Offensive consumer-created content can harm our results of operations or reputation • We rely on software development arrangements with third parties • The risk of distributors, development, and licensing partners or other third parties being unable to honor their commitments or otherwise putting our brand at risk • Increasing importance of digital sales and free-to-play games exposes us to the risks of that business model • We must compete for advertisements and offers that are incorporated into our free-to-play games • Our acquisitions and investments may not have the anticipated results • International operations risks • The loss of server capacity, lack of sufficient bandwidth, or connectivity issues could cause our business to suffer • Use of open-source software exposes us to risks • Our software is susceptible to errors • The continued ability to acquire and maintain license to intellectual property is key • We may experience fluctuations in the recurring portion of our business • We are dependent on the timing of our product releases • We are dependent on the future success of our Grand Theft Auto products and other “hit” titles • Adverse effects of price protection and returns • A limited number of customers account for a significant portion of our sales • Content policies could negatively affect sales • Entertainment Software Rating Board ratings for our products could negatively affect our ability to distribute and sell • The competitive position and value of our products could be adversely affected by unprotected intellectual property • We have a significant amount of outstanding debt • The value of our virtual items is highly dependent on how we manage the economies in our games • There is potential for unauthorized or fraudulent transactions of accounts and virtual items outside of our games Risks related to legal or regulatory compliance • Government regulation of the internet can affect our business • Legislation could subject us to claims or otherwise harm our business • Failure to comply with laws and regulations, including data privacy, could harm our business • Adverse effect of alleged or actual infringement on the intellectual property rights of third parties Risks related to financial and economic condition • Provisions in our charter documents and debt agreements may impede or discourage a takeover • Adverse effects of changes in tax rates and additional tax liabilities 8 • We are subject to risks and uncertainties of international trade, including foreign currency fluctuations • Potential adverse effects of existing or future accounting standards • Adverse effects of declines in consumer spending and changes in the economy General Risk Factors • Additional issuances of equity securities would cause dilution and could affect the market price of our common stock • We are subject to risks related to corporate and social responsibility and reputation • Catastrophic events and climate change may have a long-term impact on our business • We may be adversely affected by the effects of inflation • We are and may become involved in legal proceedings that may result in adverse outcomes Risks relating to our business and industry The interactive entertainment software industry is highly competitive.
If users do not elect participate in functionality that supports the delivery of targeted advertising on their devices, our ability to deliver effective advertising campaigns on behalf of our advertisers could suffer, which could cause our business, financial condition, or results of operations to suffer.
If users do not elect to participate in functionality that supports the delivery of targeted advertising on their devices, our ability to deliver effective advertising campaigns on behalf of our advertisers could suffer, which could cause our business, financial condition, or results of operations to suffer.
Even if we do succeed in acquiring or investing in a business, intellectual property or other asset, such acquisitions and investments involve a number of risks, including: • retaining key employees and maintaining the key business and customer relationships of the businesses we acquire; • cultural challenges associated with integrating employees from an acquired company or business into our organization; • the possibility that the combined company would not achieve the expected benefits, including any anticipated operating and product synergies, of the acquisition as quickly as anticipated or that the costs of, or operational difficulties arising from, an acquisition would be greater than anticipated; • the potential for the acquired business to underperform relative to our expectations and the acquisition price; • unexpected tax consequences from the acquisition, or the tax treatment of the acquired business's operations going forward, giving rise to incremental tax liabilities that are difficult to predict; • significant acquisition-related accounting adjustments, particularly relating to an acquired company's deferred revenue, that may cause reported revenue and profits of the combined company to be lower than the sum of their stand-alone revenue and profits; • significant accounting charges resulting from the completion and integration of a sizable acquisition and increased capital expenditures, including potential impairment charges incurred to write down the carrying amount of intangible assets generated as a result of an acquisition; • the possibility that significant acquisitions, when not managed cautiously, may result in the over-extension of our existing operating infrastructures, internal controls and information technology systems; • the possibility that we will not discover important facts during due diligence that could have a material adverse effect on the value of the businesses we acquire, including the possibility that a change of control of a company we acquire triggers a termination of contractual or intellectual property rights important to the operation of its business; • the need to integrate an acquired company's accounting, management information, human resource and other administrative systems to permit effective management and timely reporting, and the need to implement or remediate controls, procedures and policies appropriate for a public company in an acquired company that, prior to the acquisition, lacked these controls, procedures and policies; • litigation or other claims in connection with, or inheritance of claims or litigation risks as a result of, an acquisition, including claims from terminated employees, customers or other third parties; and • to the extent that we engage in strategic transactions outside of the U.S., we face additional risks, including risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. • the need to implement controls, procedures and policies appropriate for a larger, U.S.-based public company at companies that prior to acquisition may not have as robust controls, procedures and policies, particularly, with respect to the effectiveness of cyber and information security practices and incident response plans, compliance with data privacy and protection and other laws and regulations protecting the rights of players and customers, and compliance with U.S.-based economic policies and sanctions which may not have previously been applicable to the acquired company’s operations.
Even if we do succeed in acquiring or investing in a business, intellectual property or other asset, such acquisitions and investments involve a number of risks, including: • retaining key employees and maintaining the key business and customer relationships of the businesses we acquire; • cultural challenges associated with integrating employees from an acquired company or business into our organization; • the possibility that the combined company would not achieve the expected benefits, including any anticipated operating and product synergies, of the acquisition as quickly as anticipated or that the costs of, or operational difficulties arising from, an acquisition would be greater than anticipated; • the potential for the acquired business to underperform relative to our expectations and the acquisition price; • unexpected tax consequences from the acquisition, or the tax treatment of the acquired business's operations going forward, giving rise to incremental tax liabilities that are difficult to predict; • significant acquisition-related accounting adjustments, particularly relating to an acquired company's deferred revenue, that may cause reported revenue and profits of the combined company to be lower than the sum of their stand-alone revenue and profits; • significant accounting charges resulting from the completion and integration of a sizable acquisition and increased capital expenditures, including potential impairment charges incurred to write down the carrying amount of intangible assets generated as a result of an acquisition; • the possibility that significant acquisitions, when not managed cautiously, may result in the over-extension of our existing operating infrastructures, internal controls and information technology systems; 18 • the possibility that we will not discover important facts during due diligence that could have a material adverse effect on the value of the businesses we acquire, including the possibility that a change of control of a company we acquire triggers a termination of contractual or intellectual property rights important to the operation of its business; • the need to integrate an acquired company's accounting, management information, human resource and other administrative systems to permit effective management and timely reporting, and the need to implement or remediate controls, procedures and policies appropriate for a public company in an acquired company that, prior to the acquisition, lacked these controls, procedures and policies; • litigation or other claims in connection with, or inheritance of claims or litigation risks as a result of, an acquisition, including claims from terminated employees, customers or other third parties; • to the extent that we engage in strategic transactions outside of the U.S., we face additional risks, including risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries; and • the need to implement controls, procedures and policies appropriate for a larger, U.S.-based public company at companies that prior to acquisition may not have as robust controls, procedures and policies, particularly, with respect to the effectiveness of cyber and information security practices and incident response plans, compliance with data privacy and protection and other laws and regulations protecting the rights of players and customers, and compliance with U.S.-based economic policies and sanctions which may not have previously been applicable to the acquired company’s operations.
In addition to the market factors noted above, our ability to successfully develop games for mobile platforms and their ability to achieve commercial success will depend on our ability to: • effectively market our games to existing and new players; • achieve benefits from our player acquisition costs; • achieve viral organic growth and gain customer interest in our games through free or more efficient channels; • adapt to changing player preferences; • adapt to new technologies and feature sets for mobile and other devices; 16 • expand and enhance games after their initial release; • attract, retain and motivate talented and experienced game designers, product managers and engineers; • partner with mobile platforms and obtain featuring opportunities; • continue to adapt game feature sets for an increasingly diverse set of mobile devices, including various operating systems and specifications, limited bandwidth and varying processing power and screen sizes; • minimize launch delays and cost overruns on the development of new games and features; • achieve and maintain successful customer engagement and effectively monetize our games; • maintain a quality social game experience and retain our players; • develop games that can build upon or become franchise games; • compete successfully against a large and growing number of existing market participants; • accurately forecast the timing and expense of our operations, including game and feature development, marketing and customer acquisition, customer adoption and success of bookings growth; • minimize and quickly resolve bugs or outages; and • acquire and successfully integrate high quality mobile game assets, personnel or companies.
In addition to the market factors noted above, our ability to successfully develop games for mobile platforms and their ability to achieve commercial success will depend on our ability to: • effectively market our games to existing and new players; • achieve benefits from our player acquisition costs; • achieve viral organic growth and gain customer interest in our games through free or more efficient channels; • adapt to changing player preferences; • adapt to new technologies and feature sets for mobile and other devices; • expand and enhance games after their initial release; • attract, retain and motivate talented and experienced game designers, product managers and engineers; • partner with mobile platforms and obtain featuring opportunities; • continue to adapt game feature sets for an increasingly diverse set of mobile devices, including various operating systems and specifications, limited bandwidth and varying processing power and screen sizes; • minimize launch delays and cost overruns on the development of new games and features; • achieve and maintain successful customer engagement and effectively monetize our games; • maintain a quality social game experience and retain our players; • develop games that can build upon or become franchise games; • compete successfully against a large and growing number of existing market participants; • accurately forecast the timing and expense of our operations, including game and feature development, marketing and customer acquisition, customer adoption and success of bookings growth; • minimize and quickly resolve bugs or outages; and • acquire and successfully integrate high quality mobile game assets, personnel or companies.
If this were to occur, we might be required to alter some of our games to address these additional requirements or seek licenses, authorizations, or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, such as reporting to regulators, all of which could significantly increase our operating costs.
If this were to occur, we might be required to alter some of our 29 games to address these additional requirements or seek licenses, authorizations, or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, such as reporting to regulators, all of which could significantly increase our operating costs.
Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in 18 our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis. Our stockholders may not have the opportunity to review, vote on or evaluate future acquisitions or investments. We face risks from our international operations.
Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis. Our stockholders may not have the opportunity to review, vote on or evaluate future acquisitions or investments. We face risks from our international operations.
Competitors may develop content that imitates or competes with our best-selling games, potentially reducing our sales or our ability to charge the same prices we have historically charged for our products. These competing products may take a larger share of consumer spending than anticipated, which could cause product sales to fall below expectations.
Additionally, competitors may develop content that imitates or competes with our best-selling games, potentially reducing our sales or our ability to charge the same prices we have historically charged for our products. These competing products may take a larger share of consumer spending than anticipated, which could cause product sales to fall below expectations.
Furthermore, uncertainty and adverse changes in the economy could also increase the risk of material losses on our investments, increase costs associated with developing and publishing our products, increase the cost and availability of sources of financing, and increase our exposure to material losses from bad debts, any of which could have a material adverse 30 effect on our business, financial condition and operating results.
Furthermore, uncertainty and adverse changes in the economy could also increase the risk of material losses on our investments, increase costs associated with developing and publishing our products, increase the cost and availability of sources of financing, and increase our exposure to material losses from bad debts, any of which could have a material adverse effect on our business, financial condition and operating results.
If we fail to grow or sustain the number of our paying players, if the rates at which 10 we attract and retain paying players declines (whether due to financial hardship as a result of an economic downturn or for any other reason), or if the average amount our players pay declines, our financial results could be negatively affected.
If we fail to grow or sustain the number of our paying players, if the rates at which we attract and retain paying players declines (whether due to financial hardship as a result of an economic downturn or for any other reason), or if the average amount our players pay declines, our financial results could be negatively affected.
If either of these events recurs on a prolonged, or even short-term, basis or other similar issues arise 12 that impact players’ ability to access our games, access social features or purchase a license to virtual items, our business, financial condition, results of operations or reputation may be harmed.
If either of these events recurs on a prolonged, or even short-term, basis or other similar issues arise that impact players’ ability to access our games, access social features or purchase a license to virtual items, our business, financial condition, results of operations or reputation may be harmed.
Certain of our customers may decline to 22 carry products containing mature content. The loss of our relationships with principal customers or a decline in sales to principal customers, including as a result of a product being rated "AO" (age 18 and over), could materially adversely affect our business, financial condition, and operating results.
Certain of our customers may decline to carry products containing mature content. The loss of our relationships with principal customers or a decline in sales to principal customers, including as a result of a product being rated "AO" (age 18 and over), could materially adversely affect our business, financial condition, and operating results.
Further, as we increase our downloadable content and add new features to our online services, user playing patterns can affect our estimate of the service period, and we could be required to recognize revenues, and defer related costs, over a shorter or longer period of time than we initially allocated.
Further, as we increase our downloadable content and add new features to our online services, user playing patterns can affect our estimate of the service period, and we 31 could be required to recognize revenues, and defer related costs, over a shorter or longer period of time than we initially allocated.
If we or these third parties are subject to data security breaches, we may have a loss in sales or increased costs arising from the restoration or implementation of additional security measures which could materially and adversely affect our business, 13 financial condition, and operating results.
If we or these third parties are subject to data security breaches, we may have a loss in sales or increased costs arising from the restoration or implementation of additional security measures which could materially and adversely affect our business, financial condition, and operating results.
Our success depends on our ability to continually identify and develop new titles timely. We rely on third-party software developers for the development of some of our titles. Quality third-party developers are continually in high demand, 15 and those who have developed titles for us in the past may not be available to develop software for us in the future.
Our success depends on our ability to continually identify and develop new titles timely. We rely on third-party software developers for the development of some of our titles. Quality third-party developers are continually in high demand, and those who have developed titles for us in the past may not be available to develop software for us in the future.
We are subject to a variety of laws in the U.S. and abroad that affect our business, including state and federal laws regarding consumer protection, electronic marketing, protection of minors, data protection and privacy, competition, taxation, intellectual property, export, and national security, which are continuously evolving and developing.
We are subject to a variety of laws in the U.S. and abroad that affect our business, including state and federal laws regarding consumer protection, electronic marketing, protection of minors, data protection and privacy, competition, taxation, 19 intellectual property, export, and national security, which are continuously evolving and developing.
Changes in laws or regulations that adversely affect the growth, popularity, or use of the Internet, including laws affecting "net neutrality" or measures enacted in certain jurisdictions as a result of the COVID-19 pandemic, could decrease the demand for our products and services or increase our cost of doing business.
Changes in laws or regulations that adversely affect the growth, popularity, or use of the Internet, including laws affecting "net neutrality" or measures enacted in certain jurisdictions, for example as a result of the COVID-19 pandemic, could decrease the demand for our products and services or increase our cost of doing business.
If we fail to comply with our posted privacy policy, EULA, or TOS, or if we fail to comply with existing privacy or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, affect our financial condition, and harm our business.
If we fail to comply with our posted privacy policy or TOS, or if we fail to comply with existing privacy or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, affect our financial condition, and harm our business.
A resulting perception that our products or services 14 do not adequately protect personal information could result in a loss of current or potential consumers and business partners. In addition, if any of our business partners experience a security incident that leads to disclosure of consumer information, our reputation could be harmed, resulting in loss of revenue.
A resulting perception that our products or services do not adequately protect personal information could result in a loss of current or potential consumers and business partners. In addition, if any of our business partners experience a security incident that leads to disclosure of consumer information, our reputation could be harmed, resulting in loss of revenue.
In addition, we could be required to, or may find it necessary to, offer a refund for the product or service, suspend the availability or sale of the product or service or expend significant resources to cure the defect, bug or error each of which could significantly harm our business and operating results.
In addition, we could be required to, or may find it necessary to, offer a refund for the product or service, suspend the availability 21 or sale of the product or service or expend significant resources to cure the defect, bug or error each of which could significantly harm our business and operating results.
Such proposals seek to prohibit the sale of products containing certain content included in some of our games. If any such proposals are enacted into law, it may limit the potential market for some of our games in the U.S., and adversely affect our business, financial condition and operating results.
Such proposals seek to prohibit the sale of products containing certain content and functionality included in some of our games. If any such proposals are enacted into law, it may limit the potential market for some of our games in the U.S., and adversely affect our business, financial condition and operating results.
In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on our business, reputation, operating results, or financial condition. 31 Item 1B. Unresolved Staff Comments None.
In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on our business, reputation, operating results, or financial condition. Item 1B. Unresolved Staff Comments None.
In addition, we 28 believe that interactive entertainment software will increasingly become the subject of claims that such software infringes on the intellectual property rights of others with both the growth of online functionality and advances in technology, game content and software graphics as games become more realistic.
In addition, we believe that interactive entertainment software will increasingly become the subject of claims that such software infringes on the intellectual property rights of others with both the growth of online functionality and advances in technology, game content and software graphics as games become more realistic.
Additionally, if the popularity of a franchise declines, as has happened in the past with other popular franchises, we may have to write off the unrecovered portion of the underlying intellectual property assets, which could negatively impact our business.
Additionally, if the popularity of a franchise declines, as has happened in the past with other 22 popular franchises, we may have to write off the unrecovered portion of the underlying intellectual property assets, which could negatively impact our business.
Additionally, we derive a significant portion of our revenue from distribution of our games on the Apple App Store and the Google Play Store, and the virtual items we sell in our games are purchased using the payment processing systems of these platform providers.
Additionally, we derive a significant portion of our revenue from distribution of our games on the Apple App Store and the Google Play Store, and the virtual items we sell in our games are purchased using the payment processing systems of 11 these platform providers.
Additionally, tax determinations are regularly subject to audit by tax authorities, and developments in those audits could adversely affect our income tax provision. Should the ultimate tax liability exceed estimates, our income tax provision and net (loss) income or loss could be materially affected.
Additionally, tax determinations are regularly subject to audit by tax authorities, and developments in those audits could adversely affect our income tax provision. Should our ultimate tax liability exceed estimates, our income tax provision and net income or loss could be materially affected.
Risks related to legal or regulatory compliance Companies and governmental agencies may restrict access to platforms, our website, mobile applications or the Internet generally, which could have a negative impact on our business.
Risks related to legal or regulatory compliance 26 Companies and governmental agencies may restrict access to platforms, our website, mobile applications or the Internet generally, which could have a negative impact on our business.
Any theft and/or unauthorized use or publication of our trade secrets and other confidential business information because of such an event could adversely affect our competitive position, reputation, brand, and future sales of our products.
Any theft and/or unauthorized use or publication of our trade secrets and other confidential business information because of such an event could adversely affect our competitive position, reputation, 13 brand, and future sales of our products.
From time to time, objectionable and offensive or potentially dangerous consumer content may be posted to a gaming or other site with online chat features or game forums which allow consumers to post comments.
From time to time, objectionable and offensive or 15 potentially dangerous consumer content may be posted to a gaming or other site with online chat features or game forums which allow consumers to post comments.
Climate change could result in an increase in the frequency or severity of natural disasters, such as earthquakes, fires, floods, or significant power outages and other catastrophic events.
Furthermore, climate change could result in an increase in the frequency or severity of natural disasters, such as earthquakes, fires, floods, or significant power outages and other catastrophic events.
We have faced and in the future could face sophisticated attacks, including attacks referred to as advanced persistent threats, which are cyber-attacks aimed at compromising our intellectual property and other commercially sensitive information, such as the source code and game assets for our software or confidential customer or employee information, which remain undetected for prolonged periods of time.
We have faced, and in the future could face, sophisticated attacks, including attacks referred to as advanced persistent threats, which are cyberattacks aimed at compromising our intellectual property and other commercially sensitive information, such as the source code and game assets for our software or confidential customer or employee information, which remain undetected for prolonged periods of time.
If appropriate opportunities present themselves, we may acquire or make investments in businesses, intellectual properties and other assets that we believe are strategic, such as our acquisition of Zynga. We may not be able to identify, negotiate or finance any future acquisition or investment successfully.
If appropriate opportunities present themselves, we may acquire or make investments in businesses, intellectual properties and other assets that we believe are strategic, such as our acquisition of Zynga and our pending acquisition of Gearbox. We may not be able to identify, negotiate or finance any future acquisition or investment successfully.
Many large companies, such as Amazon, Facebook and Google, invest significantly in data analytics to make their websites and platforms more attractive to advertisers. In order for our advertising business to continue to succeed, we need to continue to demonstrate the reach of our player network and success of our advertising partners.
Many large companies, such as Amazon, Facebook and Google, invest significantly in data analytics to make their websites and platforms more attractive to advertisers. For our advertising business to continue to succeed, we need to continue to demonstrate the reach of our player network and success of 17 our advertising partners.
To discourage unauthorized purchases and sales of our virtual items, we state in our terms of service that the buying or selling of virtual items from unauthorized third-party sellers may result in bans from our games or legal action. We periodically encounter such issues and expect to continue to do so.
To discourage unauthorized purchases and sales of game accounts and virtual items, we state in our terms of service that the buying or selling of game accounts and virtual items from unauthorized third-party sellers may result in bans from our games or legal action. We periodically encounter such issues and expect to continue to do so.
All information technology systems and networks are potentially vulnerable to damage or interruption from a variety of sources, including but not limited to cyber-attacks, computer viruses, malicious software, security breaches, energy blackouts, natural disasters, terrorism, war, and telecommunication failures. We securely store the source code for our interactive entertainment software products as it is created.
All information technology systems and networks are potentially vulnerable to damage or interruption from a variety of sources, including but not limited to cyberattacks, computer viruses, malicious software, security breaches, energy blackouts, natural disasters, terrorism, war, and telecommunication failures. We securely store the source code for our interactive entertainment software products as it is created.
Significant judgment is required in determining our worldwide provision for income taxes, and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are required to estimate future taxes.
Significant judgment is required in determining our worldwide provision for income taxes, and, in the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We are required to estimate future taxes.
In 2020, the U.K. left the European Union ("E.U.") ("Brexit"). Subsequently, the U.K. and the E.U. struck a bilateral trade and cooperation deal governing the future relationship between the U.K. and the E.U. (the "Trade and Cooperation Agreement"), which took effect on May 1, 2021.
In 2020, the U.K. left the E.U. ("Brexit"). Subsequently, the U.K. and the E.U. struck a bilateral trade and cooperation deal governing the future relationship between the U.K. and the E.U. (the "Trade and Cooperation Agreement"), which took effect on May 1, 2021.
Further, these covenants may limit our ability to take various actions, including incurring additional debt, paying dividends, repurchasing shares, and acquiring or disposing of assets or businesses. Accordingly, we may be restricted from taking actions that management believes would be desirable and in the best interest of us and our stockholders.
Further, these covenants may limit our ability to take various actions, including incurring additional debt, paying dividends, repurchasing shares, and acquiring or disposing of assets or businesses. Accordingly, we may be restricted from taking actions that we believe would be desirable and in the best interest of us and our stockholders.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online gaming presence, especially in China and South Korea.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online gaming presence, especially in China.
Negative perceptions could arise despite our efforts, though, and may result in loss of engagement with our products and services, increased scrutiny from government bodies and consumer groups, and/or litigation, any of which could negatively impact our business. Climate change may have a long-term impact on our business.
Negative perceptions could arise despite our efforts, though, and may result in loss of engagement with our products 32 and services, increased scrutiny from government bodies and consumer groups, and/or litigation, any of which could negatively impact our business. Catastrophic events and climate change may have a long-term impact on our business.
Sales to our five largest customers during the fiscal year ended March 31, 2023 accounted for 79.6% of our net revenue, with Sony, Google, Apple, and Microsoft each accounting for more than 10.0%. Our sales are made primarily without long-term agreements or other commitments, and our customers may terminate their relationship with us at any time.
Sales to our five largest customers during the fiscal year ended March 31, 2024 accounted for 79.8% of our net revenue, with Sony, Apple, Google, and Microsoft each accounting for more than 10.0%. Our sales are made primarily without long-term agreements or other commitments, and our customers may terminate their relationship with us at any time.
If we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example, as a result of COVID-19 or other unforeseen circumstances, we may not be able to release titles according to our schedule and at budgeted costs.
If we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example, as a result of unforeseen circumstances, we may not be able to release titles according to our schedule and at budgeted costs.
In some of our games, such as CSR Racing 2 , Empires & Puzzles , FarmVille 3 , Golf Rival , Harry Potter: Puzzles & Spells , Merge Dragons! , Merge Magic! , NBA 2K , WWE 2K , and Zynga Poker , certain mechanics may be deemed as “loot boxes.” New regulation by the FTC, U.S. states or other international jurisdictions, which may vary significantly across jurisdictions and which we may be required to comply with, could require that these game mechanics be modified or removed from games, increase the costs of operating our games, impact player engagement and monetization or otherwise harm our business performance.
In some of our games, such as CSR Racing 2 , Dragon City, Empires & Puzzles , FarmVille 3 , Golf Rival , Harry Potter: Puzzles & Spells , Merge Dragons! , Merge Magic! , Monster Legends, NBA 2K , Top Eleven, Top Troops, WWE 2K , and Zynga Poker , certain mechanics may be deemed as “loot boxes.” New regulation by the FTC, U.S. states or other international jurisdictions, which may vary significantly across jurisdictions and which we may be required to comply with, could require that these game mechanics be modified or removed from games, increase the costs of operating our games, impact player engagement and monetization or otherwise harm our business performance.
As our industry grows, we may be subject to an increasing amount of litigation that is common in the software industry based on allegations of infringement or other alleged violations of patent, copyright, or trademarks.
As our industry grows, we have been, and may be, subject to an increasing amount of litigation that is common in the software industry based on allegations of infringement or other alleged violations of patent, copyright, or trademarks.
Some of our players may make sales or purchases of virtual items used in our games through unauthorized or fraudulent third-party websites, which may reduce our revenue. Virtual items in our games have no monetary value outside of our games.
Some of our players may make sales or purchases of virtual items used in our games through unauthorized or fraudulent third-party websites, which may reduce our revenue. Game accounts and virtual items in our games have no monetary value outside of our games.
In the fiscal year ended March 31, 2023, we derived 98.0% of our mobile revenue on Apple and Google platforms. We are subject to the standard policies and terms of service of third-party platforms, which govern the promotion, distribution, content and operation generally of games on the platform.
In the fiscal year ended March 31, 2024, we derived 95.0% of our mobile revenue on Apple and Google platforms. We are subject to the standard policies and terms of service of third-party platforms, which govern the promotion, distribution, content and operation generally of games on the platform.
If we breach any of the covenants and do not obtain a waiver from the holders of the Senior Notes, the Convertible Notes, or the lenders under the 2022 Credit Agreement, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.
If we breach any of the covenants and do not obtain a waiver from the holders of our indebtedness or the lenders under the 2022 Credit Agreement, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.
If we do not correctly assess consumer preferences in the countries in which we sell our products, or respond to other risks related to our international operations, it could negatively affect our business. Our business may also be affected directly or indirectly by major world events, such as the conflict between Russia and Ukraine.
If we do not correctly assess consumer preferences in the countries in which we sell our products, or respond to other risks related to our international operations, it could negatively affect our business. Our business may also be affected directly or indirectly by major world events, such as the Russia-Ukraine war and the Israel-Hamas war.
Further, if one of our games is “re‑rated” for any reason, a ratings organization could require corrective actions, which could include a recall, retailers could refuse to sell it and demand that we accept the return of any unsold or returned copies or consumers could demand a refund for copies previously purchased.
Further, if one of our games is re‑rated for any reason, a ratings 24 organization could require corrective actions, which could include a recall, retailers could refuse to sell it and demand that we accept the return of any unsold or returned copies or consumers could demand a refund for copies previously purchased.
Further, and most notably in the mobile ecosystem, companies that provide the platforms on which our games are played are changing the terms on how publishers can collect and use personal data obtained from users on those platforms. Player use of our games is subject to our privacy policy, end user license agreements ("EULA"), and terms of service ("TOS").
Further, and most notably in the mobile ecosystem, companies that provide the platforms on which our games are played are changing the terms on how publishers can collect and use personal data obtained from users on those platforms. Player use of our games is subject to our privacy policy and terms of service ("TOS").
Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Further, the risk of such a breach may be heightened by world events, such as the current conflict between Russia and Ukraine.
Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Further, the risk of such a breach may be heightened by world events, such as the Russia-Ukraine war and the Israel-Hamas war.
These unauthorized or fraudulent transactions are usually arranged on third-party websites and the virtual items offered may have been obtained through unauthorized means such as exploiting vulnerabilities in our games, from scamming our players with fake offers for virtual items or other game benefits, or from credit card fraud. We do not generate any revenue from these transactions.
These unauthorized or fraudulent transactions are usually arranged on third-party websites and the virtual items offered may have been obtained through unauthorized means such as exploiting vulnerabilities in our games, from scamming our players with fake offers for virtual items or other game benefits, or from credit card fraud.
The existence of inflation in the economy has the potential to result in higher interest rates and capital costs, supply shortages, increased costs of labor and other similar effects. Further, world events such as the conflict between Russia and Ukraine could affect inflationary trends.
The existence of inflation in the economy has the potential to result in higher interest rates and capital costs, supply shortages, increased costs of labor and other similar effects. Further, world events, such as the Russia-Ukraine war and the Israel-Hamas war , could affect inflationary trends.
As a result of COVID-19, our counterparty credit risk may be particularly exacerbated, as certain of our counterparties may face financial difficulties in paying owed amounts on a timely basis or at all.
As a result of geopolitical conditions, our counterparty credit risk may be particularly exacerbated, as certain of our counterparties may face financial difficulties in paying owed amounts on a timely basis or at all.
If new social casino regulations are imposed, or other regulations are interpreted to apply to our social casino games, certain, or all, of our casino-themed games may become subject to such rules and regulations and expose us to civil and criminal penalties if we do not comply.
If 27 new regulations are imposed, or other regulations are interpreted to apply to our social casino games or certain game mechanics, certain, or all, of our casino-themed games and games that include such game mechanics may become subject to such rules and regulations and expose us to civil and criminal penalties if we do not comply.
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 have implemented and are in the process of implementing a variety of measures to enhance further our cybersecurity protections.
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 have implemented and will continue to implement a variety of measures to enhance further our cybersecurity protections.
In addition, there are ongoing academic, political and regulatory discussions in the U.S., Europe, Australia, Brazil and other jurisdictions regarding whether certain game genres, such as social casino, or certain game mechanics, such as “loot boxes,” should be subject to a higher level or different type of regulation than other game genres or mechanics to protect consumers, in particular minors and persons susceptible to addiction, and, if so, what such regulation should include.
In addition, there are ongoing academic, political and regulatory discussions in the U.S., Europe, Middle East, Asia, Australia, Brazil and other jurisdictions regarding whether certain game genres, such as social casino, or certain game mechanics, such as “loot boxes,” should be subject to a higher level or different type of regulation than other game genres or mechanics to protect consumers, in particular minors and vulnerable adults, and, if so, what such regulation should include.
If the mobile devices on which our games are available decline in popularity or become obsolete faster than anticipated, we could experience a decline in revenue and bookings and may not achieve the anticipated return on our development efforts.
In addition, we do not currently offer our games on all mobile devices. If the mobile devices on which our games are available decline in popularity or become obsolete faster than anticipated, we could experience a decline in revenue and bookings and may not achieve the anticipated return on our development efforts.
We may issue equity or equity-based securities in the future to facilitate acquisitions or strategic transactions, as we did in connection with our acquisition of Zynga, to adjust our ratio of debt to equity, to fund expansion of our operations or for other purposes.
We may issue equity or equity-based securities in the future to facilitate acquisitions or strategic transactions, as we did in connection with our acquisition of Zynga and as we intend to do in connection with our pending acquisition of Gearbox, to adjust our ratio of debt to equity, to fund expansion of our operations or for other purposes.
We are subject to risks inherent in foreign trade, including increased credit risks, tariffs, and duties, fluctuations in foreign currency exchange rates, shipping delays, and international political, regulatory and economic developments, such as those relating to the conflict between Russia and Ukraine, all of which can have a significant influence on our operating results.
We are subject to risks inherent in foreign trade, including increased credit risks, tariffs, and duties, fluctuations in foreign currency exchange rates, shipping delays, and international political, regulatory and economic developments, such as the Russia-Ukraine war and the Israel-Hamas war, all of which can have a significant influence on our operating results.
Such a decline could also make our doing business in Europe more difficult, which could negatively affect sales to consumers of our products. Without access to the single E.U. market, it may be more challenging and costly to distribute our products in Europe.
Such a decline could also make our doing business in Europe more difficult, which could negatively affect sales to consumers of our products. Without access to a single market that includes the U.K. and countries of the E.U., it may be more challenging and costly to distribute our products to those regions.
We derive a significant portion of our revenue from the sale of products made for video game platforms manufactured by third parties, such as Sony's PlayStation consoles and Microsoft's Xbox consoles, which comprised 43.1% of our net revenue 11 by product platform for the fiscal year ended March 31, 2023.
We derive a significant portion of our revenue from the sale of products made for video game platforms manufactured by third parties, such as Sony's PlayStation consoles and Microsoft's Xbox consoles, which comprised 40.5% of our net revenue by product platform for the fiscal year ended March 31, 2024.
Such events may adversely impact critical infrastructure, have the potential to disrupt our business, our third-party suppliers, or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. We may be adversely affected by the effects of inflation.
Such events may adversely impact critical infrastructure, have the potential to disrupt our business, our third-party suppliers, or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.
Adverse economic conditions, such as a prolonged U.S. or international general economic downturn, such as those caused by COVID-19, including periods of increased inflation, unemployment levels, tax rates, interest rates, energy prices, or declining consumer confidence, could also reduce consumer spending.
Adverse economic conditions, such as a prolonged U.S. or international general economic downturn, including periods of increased inflation, unemployment levels, tax rates, interest rates, energy prices, or declining consumer confidence, could reduce consumer spending.
We are required to comply with the covenants set forth in the indenture governing our Senior Notes, the Convertible Notes, and the 2022 Credit Agreement. Our ability to comply with these covenants may be affected by events beyond our control.
We are required to comply with the covenants set forth in the indentures governing our outstanding indebtedness, including our Senior Notes, Convertible Notes, and 2022 Credit Agreement. Our ability to comply with these covenants may be 25 affected by events beyond our control.
(Refer to Note 21 – Subsequent Events to our Consolidated Financial Statements, herein.) As our outstanding Senior Notes mature, we will have to expend significant resources to either repay or refinance such notes.
(Refer to Note 11 – Debt to our Consolidated Financial Statements, herein.) As our outstanding Senior Notes mature, we will have to expend significant resources to either repay or refinance such notes.
For example, we may invest in the development of new free‑to‑play interactive entertainment products that do not achieve significant commercial success, in which case our revenues from those products likely will be lower than anticipated and we may not recover our development costs.
As such, we are increasingly exposed to the risks of the free‑to‑play business model. For example, we may invest in the development of new free‑to‑play interactive entertainment products that do not achieve significant commercial success, in which case our revenues from those products likely will be lower than anticipated and we may not recover our development costs.
We are potentially subject to a number of foreign and domestic laws and regulations that affect the offering of certain types of content, such as that which depicts violence, many of which are ambiguous, still evolving and could be interpreted in ways that could harm our business or expose us to liability.
We are potentially subject to a number of foreign and domestic laws and regulations that affect the offering of certain types of content, such as that which depicts violence or is generated by our users, many of which are ambiguous, still evolving and could be interpreted in ways that could harm our business or expose us to liability, or result in us incurring increased compliance costs.
The supply chain of hardware needed to maintain this technological infrastructure has been disrupted and geopolitical events, including the Russian invasion of Ukraine and any indirect effects, may further complicate existing supply chain constraints.
The supply chain of hardware needed to maintain this technological infrastructure has been disrupted and geopolitical events, including the Russia-Ukraine war and the Israel-Hamas war and any indirect effects, may further complicate existing supply chain constraints.
Sales in international markets, primarily in Europe, have accounted for a significant portion of our net revenue. For the fiscal year ended March 31, 2023, 37.2% of our net revenue was earned outside the U.S.
Sales in international markets, primarily in Europe, have accounted for a significant portion of our net revenue. For the fiscal year ended March 31, 2024, 38.7% of our net revenue was earned outside the U.S.
While we believe that we can reliably estimate price protection and returns, if price protection and return rates for our products exceed our reserves, our revenue could decline, which could have a material adverse effect on our business, financial condition, and operating results.
While we believe that we can reliably estimate price protection and returns, if price protection and return rates for our products exceed our reserves, our revenue could decline, which could have a material adverse effect on our business, financial condition, and operating results. A limited number of customers account for a significant portion of our sales.
As another example, in April 2021, Apple released iOS version 14.5 which required developers to get explicit permission from users, on an app-by-app basis, to use the identifier-for-advertisers, a device identifier assigned by Apple to each of its devices and used by advertisers to attribute app installs to advertising campaigns, target users through user acquisition, and deliver targeted ads.
For example, in April 2021, Apple began requiring developers to get explicit permission from users, on an app-by-app basis, to use the identifier-for-advertisers, a device identifier assigned by Apple to each of its devices and used by advertisers to attribute app installs to advertising campaigns, target users through user acquisition, and deliver targeted ads.
Grand Theft Auto products contributed 14.6% of our net revenue for the fiscal year ended March 31, 2023, and the five best-selling franchises (including Grand Theft Auto ), which may change year over year, in the aggregate accounted for 52.9% of our net revenue for the fiscal year ended March 31, 2023.
Grand Theft Auto products contributed 14.7% of our net revenue for the fiscal year ended March 31, 2024, and the five best-selling franchises (including Grand Theft Auto ), which may change year over year, in the aggregate accounted for 56.5% of our net revenue for the fiscal year ended March 31, 2024.
In 2022, the U.S. enacted The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) which includes a new corporate alternative minimum tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of 29 corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period. The CAMT is effective for the fiscal year ending March 31, 2024.
The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) includes a 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 became effective for the fiscal year ended March 31, 2024.
Our business and products are subject to a variety of existing U.S. and foreign laws and regulations, many of which are unsettled and still developing, as well as potential new legislation, all of which could subject us to claims or otherwise harm our business. Several proposals have been made for federal legislation to regulate our industry.
Our business and products are subject to a variety of existing U.S. and foreign laws and regulations, many of which are unsettled and still developing, as well as potential new legislation, all of which could subject us to claims or otherwise harm our business.
These unauthorized purchases and sales from third-party sellers have in the past and could in the future impede our revenue and profit growth by, among other things: • decreasing revenue from authorized transactions; • creating downward pressure on the prices we charge players for our virtual items; • increasing chargebacks from unauthorized credit card transactions; • causing us to lose revenue from dissatisfied players who stop playing a particular game; • causing us to lose revenue from players who we take disciplinary action against, including banning certain players who may have previously made purchases within our games; 25 • increasing costs we incur to develop technological measures to curtail unauthorized transactions; • resulting in negative publicity or harm our reputation with players and partners; and • increasing customer support costs to respond to dissatisfied players.
These unauthorized purchases and sales from third-party sellers have in the past and could in the future impede our revenue and profit growth by, among other things: • decreasing revenue from authorized transactions; • creating downward pressure on the prices we charge players for our virtual items; • increasing chargebacks from unauthorized credit card transactions; • causing us to lose revenue from dissatisfied players who stop playing a particular game; • causing us to lose revenue from players who we take disciplinary action against, including banning certain players who may have previously made purchases within our games; • increasing costs we incur to develop technological measures to detect, prevent, and curtail unauthorized transactions; • increasing costs we incur in pursuing enforcement action against the individuals and websites responsible for facilitating such unauthorized transactions; • increasing risk of certain monetization practices in our games being erroneously deemed a form of gambling in certain jurisdictions by virtue of the existence of such authorized marketplaces; • resulting in negative publicity or harm our reputation with players and partners; and • increasing customer support costs to respond to dissatisfied players.
Additionally, the shared nature of open-source software may increase the ability of cyber-attackers to discover and exploit vulnerabilities, which may increase the likelihood of a data breach, ransomware, network interruption, or other type of cyber-attack against us or against third parties who may use open source software, such as our platform partners or key vendors, any of which could negatively impact our business. 20 Our software is susceptible to errors, which can harm our financial results and reputation.
Additionally, the shared nature of open-source software may increase the ability of cyberattackers to discover and exploit vulnerabilities, which may increase the likelihood of a data breach, ransomware, network interruption, or other type of cyberattack against us or against third parties who may use open-source software, such as our platform partners or key vendors, any of which could negatively impact our business.
We will continue to monitor legislative and regulatory developments to assess potential impact. In addition, an increasing number of countries have enacted, or are considering enacting, revenue-based taxes on digital services. These digital services taxes target various business activities, including online advertising and, in some cases, video game sales.
In addition, an increasing number of countries have enacted, or are considering enacting, revenue-based taxes on digital services. These digital services taxes target various business activities, including online advertising and, in some cases, video game sales.
We may experience declines or fluctuations in the recurring portion of our business. Our business model includes revenue that we expect to be recurring in nature, such as revenue from our annualized titles and associated services, and ongoing mobile businesses.
Any of the foregoing could harm our competitive position, business, financial condition, results of operations and prospects. We may experience declines or fluctuations in the recurring portion of our business. Our business model includes revenue that we expect to be recurring in nature, such as revenue from our annualized titles and associated services, and ongoing mobile businesses.
Nonetheless, some of our players may make sales and/or purchases of their accounts or of our virtual items, such as virtual coins for our Social Slots games or Zynga Poker virtual poker chips, through unauthorized third-party sellers in exchange for real currency.
Nonetheless, some of our players may make sales and/or purchases of game accounts or virtual items, such as virtual currency, through unauthorized third-party sellers in exchange for real currency.
In addition, our results of operations may be adversely affected if certain of our customers who purchase on credit terms are no longer eligible to purchase on such terms due to their financial distress or lack of credit insurance, which may reduce the quantity of products they demand from us.
In addition, our results of operations may be adversely affected if certain of our customers who purchase on credit terms are no longer eligible to purchase on such terms due to their financial distress or lack of credit insurance, which may reduce the quantity of products they demand from us. 23 Content policies adopted by retailers, consumer opposition and litigation could negatively affect sales of our products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, our other subsidiaries lease office space in Sydney and Pyrmont, Australia; Halifax, Oakville, Montreal, Parksville, Toronto, and Vancouver, Canada; Chengdu, Beijing, Hong Kong, and Shanghai, China; Brno and Prague, Czech Republic; Helsinki, Finland; Cesson-Sévigné and Paris, France; Munich and Berlin, Germany; Budapest, Hungary; Bangalore, India; Dublin, Ireland; Tel Aviv, Israel; Tokyo, Japan; Amsterdam and Breda, Netherlands; Belgrade, Serbia; Singapore; Seoul, South Korea; Barcelona, Madrid, and Valencia, Spain; Luzerne, Switzerland; Taipei, Taiwan; Istanbul, Turkey; Brighton, Dundee, London, Lincoln, Leeds, and Oxford, United Kingdom; and, in the United States: Agoura Hills, Carlsbad, Foothill Ranch, Petaluma, Moorpark, San Jose, Irvine, and San Mateo, California; Chicago, Illinois; Sparks, Maryland; Andover and Westwood, Massachusetts; Las Vegas, Nevada; Bethpage and New York, New York; Eugene, Oregon; Austin, Texas; and Kirkland and Seattle, Washington.
Biggest changeIn addition, our other subsidiaries lease office space in Sydney and Pyrmont, Australia; Halifax, Oakville, Montreal, Parksville, Toronto, and Vancouver, Canada; Chengdu, Beijing, Hong Kong, and Shanghai, China; Prague, Czech Republic; Helsinki, Finland; Cesson-Sévigné and Paris, France; Munich and Berlin, Germany; Budapest, Hungary; Bangalore, India; Dublin, Ireland; Tel Aviv, Israel; Tokyo, Japan; Amsterdam and The Hague, Netherlands; Belgrade, Serbia; Singapore; Seoul, South Korea; Barcelona, Madrid, and Valencia, Spain; Luzerne, Switzerland; Taipei, Taiwan; Istanbul, Turkey; Birmingham, Brighton, Dundee, London, Lincoln, and Leeds, United Kingdom; and, in the United States: Agoura Hills, Carlsbad, Foothill 35 Ranch, Irvine, Los Angeles, Petaluma, Moorpark, San Francisco, San Jose, San Mateo, and San Rafael, California; Chicago, Illinois; Sparks, Maryland; Andover and Westwood, Massachusetts; Las Vegas, Nevada; Bethpage and New York, New York; Eugene, Oregon; Austin, Texas; and Kirkland and Seattle, Washington.
For information regarding our lease commitments, see Note 1 3 - Leases to our Consolidated Financial Statements.
For information regarding our lease commitments, see Note 13 - Leases to our Consolidated Financial Statements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the fiscal years ended March 31, 2023, 2022, and 2021, we repurchased 0.0, 1.3, and 0.0 shares of our common stock in the open market, respectively, for $0.0, $200.0, and $0.0, respectively, including commissions, as part of the program.
Biggest changeDuring the fiscal years ended March 31, 2024, 2023, and 2022, we repurchased 0.0, 0.0, and 1.3 shares of our common stock in the open market, respectively, for $0.0, $0.0, and $200.0, respectively, including commissions, as part of the program.
Summary Table —The table below details the share repurchases that were made by us during the three months ended March 31, 2023: Period Shares purchased Average price per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the repurchase program January 1 - 31, 2023 — — — 10.0 February 1 - 28, 2023 — — — 10.0 March 1 - 31, 2023 — — — 10.0 Item 6. [Reserved]
Summary Table —The table below details the share repurchases that were made by us during the three months ended March 31, 2024: Period Shares purchased Average price per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the repurchase program January 1 - 31, 2024 — — — 10.0 February 1 - 28, 2024 — — — 10.0 March 1 - 31, 2024 — — — 10.0 Item 6. [Reserved]
As of March 31, 2023, we had repurchased a total of 11.7 shares of our common stock under the program, and 10.0 shares of our common stock remained available for repurchase under the share repurchase program. All of the repurchased shares are classified as Treasury stock in our Consolidated Balance Sheets.
As of March 31, 2024, we had repurchased a total of 11.7 shares of our common stock under the program, and 10.0 shares of our common stock remained available for repurchase under the share repurchase program. All of the repurchased shares are classified as Treasury stock in our Consolidated Balance Sheets.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common stock trades on the NASDAQ Global Select Market under the symbol "TTWO." The number of record holders of our common stock was 345 as of May 5, 2023. Dividend Policy We have never declared or paid cash dividends.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common stock trades on the NASDAQ Global Select Market under the symbol "TTWO." The number of record holders of our common stock was 324 as of May 6, 2024. Dividend Policy We have never declared or paid cash dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table sets forth, for the periods indicated, our statements of operations, net revenue by geographic region, net revenue by platform, net revenue by distribution channel, and net revenue by content type: Fiscal Year Ended March 31, 2023 2022 2021 Total net revenue $ 5,349.9 100.0 % $ 3,504.8 100.0 % $ 3,372.8 100.0 % Cost of revenue 3,064.6 57.3 % 1,535.4 43.8 % 1,535.1 45.5 % Gross profit 2,285.3 42.7 % 1,969.4 56.2 % 1,837.7 54.5 % Selling and marketing 1,592.6 29.8 % 516.4 14.7 % 445.0 13.2 % Research and development 892.5 16.7 % 406.6 11.6 % 317.3 9.4 % General and administrative 843.1 15.8 % 511.7 14.6 % 390.4 11.6 % Depreciation and amortization 122.3 2.3 % 61.1 1.7 % 55.6 1.6 % Total operating expenses 3,450.5 64.5 % 1,495.8 42.7 % 1,208.3 35.8 % (Loss) income from operations (1,165.2) (21.8) % 473.6 13.5 % 629.4 18.7 % Interest and other, net (141.9) (2.7) % (14.2) (0.4) % 8.8 0.3 % (Loss) gain on fair value adjustments, net (31.0) (0.6) % 6.0 0.2 % 39.6 1.2 % (Loss) income before income taxes (1,338.1) (25.0) % 465.4 13.3 % 677.8 20.1 % (Benefit from) provision for income taxes (213.4) (4.0) % 47.4 1.4 % 88.9 2.6 % Net (loss) income $ (1,124.7) (21.0) % $ 418.0 11.9 % $ 588.9 17.5 % Fiscal Year Ended March 31, 2023 2022 2021 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: Mobile $ 2,538.6 47.5 % $ 403.4 11.5 % $ 274.1 8.1 % Console 2,303.8 43.1 % 2,528.9 72.2 % 2,517.0 74.6 % PC and other 507.5 9.5 % 572.5 16.3 % 581.7 17.2 % Net revenue by distribution channel: Digital online $ 5,085.7 95.1 % $ 3,149.0 89.8 % $ 2,972.4 88.1 % Physical retail and other 264.2 4.9 % 355.8 10.2 % 400.4 11.9 % Net revenue by content: Recurrent consumer spending $ 4,180.4 78.1 % $ 2,271.2 64.8 % $ 2,152.0 63.8 % Full game and other 1,169.5 21.9 % 1,233.6 35.2 % 1,220.8 36.2 % Fiscal Years ended March 31, 2023 and 2022 (millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease) Total net revenue $ 5,349.9 100.0 % $ 3,504.8 100.0 % $ 1,845.1 52.6 % Software development costs and royalties (1) 1,604.8 30.0 % 417.4 11.9 % 1,187.4 284.5 % Product costs 714.0 13.3 % 243.9 7.0 % 470.1 192.7 % Internal royalties 438.9 8.2 % 619.9 17.7 % (181.0) (29.2) % Licenses 306.9 5.7 % 254.2 7.3 % 52.7 20.7 % Cost of revenue 3,064.6 57.3 % 1,535.4 43.8 % 1,529.2 99.6 % Gross profit $ 2,285.3 42.7 % $ 1,969.4 56.2 % $ 315.9 16.0 % (1) Includes $(9.5) and $48.4 of stock-based compensation expense in fiscal year 2023 and 2022, respectively. 38 For the fiscal year ended March 31, 2023, net revenue increased by $1,845.1, as compared to the prior year.
Biggest changeThe following table sets forth, for the periods indicated, our statements of operations, net revenue by geographic region, net revenue by platform, net revenue by distribution channel, and net revenue by content type: Fiscal Year Ended March 31, 2024 2023 2022 Total net revenue $ 5,349.6 100.0 % $ 5,349.9 100.0 % $ 3,504.8 100.0 % Cost of revenue 3,107.8 58.1 % 3,064.6 57.3 % 1,535.4 43.8 % Gross profit 2,241.8 41.9 % 2,285.3 42.7 % 1,969.4 56.2 % Selling and marketing 1,550.2 29.0 % 1,586.5 29.7 % 516.4 14.7 % Research and development 948.2 17.7 % 887.6 16.6 % 406.6 11.6 % General and administrative 716.1 13.4 % 839.5 15.7 % 510.9 14.6 % 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 % (Loss) income from operations (3,590.6) (67.1) % (1,165.2) (21.8) % 473.6 13.5 % Interest and other, net (103.6) (1.9) % (141.9) (2.7) % (14.2) (0.4) % (Loss) gain on fair value adjustments, net (8.6) (0.2) % (31.0) (0.6) % 6.0 0.2 % (Loss) income before income taxes (3,702.8) (69.2) % (1,338.1) (25.0) % 465.4 13.3 % 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 % Fiscal Year Ended March 31, 2024 2023 2022 Net revenue by platform: Mobile $ 2,748.0 51.4 % $ 2,538.6 47.5 % $ 403.4 11.5 % Console 2,167.3 40.5 % 2,303.8 43.0 % 2,528.9 72.2 % PC and other 434.3 8.1 % 507.5 9.5 % 572.5 16.3 % Net revenue by distribution channel: Digital online $ 5,112.2 95.6 % $ 5,085.7 95.1 % $ 3,149.0 89.8 % Physical retail and other 237.4 4.4 % 264.2 4.9 % 355.8 10.2 % Net revenue by content: Recurrent consumer spending $ 4,213.5 78.8 % $ 4,180.4 78.1 % $ 2,271.2 64.8 % Full game and other 1,136.1 21.2 % 1,169.5 21.9 % 1,233.6 35.2 % Fiscal Years ended March 31, 2024 and 2023 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) — % 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) % Cost of revenue 3,107.8 58.1 % 3,064.6 57.3 % 43.2 1.4 % Gross profit $ 2,241.8 41.9 % $ 2,285.3 42.7 % $ (43.5) (1.9) % (1) Includes $24.4 and $(9.5) of stock-based compensation expense in fiscal year 2024 and 2023, respectively. 41 For the fiscal year ended March 31, 2024, net revenue decreased by $0.3, as compared to the prior year.
We continue to evaluate the potential impact the ARPA may have on our operations and Consolidated Financial Statements in future periods.
We continue to evaluate the potential impact ARPA may have on our operations and Consolidated Financial Statements in future periods.
Off-Balance Sheet Arrangements As of March 31, 2023 and 2022, we did not have any material relationships with unconsolidated entities or financial parties, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Off-Balance Sheet Arrangements As of March 31, 2024 and 2023, we did not have any material relationships with unconsolidated entities or financial parties, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
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.
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.
With few exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal year ended March 31, 2016. Certain taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2016 through March 31, 2021.
With few exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal year ended March 31, 2016. Certain taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2016 through March 31, 2022.
During the fiscal years ended March 31, 2023, 2022, and 2021, we repurchased 0.0, 1.3, and 0.0 shares of our common stock, respectively, in the open market for $0.0, $200.0, and $0.0, respectively, including commissions as part of the program.
During the fiscal years ended March 31, 2024, 2023, and 2022, we repurchased 0.0, 0.0, and 1.3 shares of our common stock, respectively, in the open market for $0.0, $0.0, and $200.0, respectively, including commissions as part of the program.
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 41 March 31, 2024.
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 was effective for taxable year ending March 31, 2024.
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").
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").
Senior Notes On April 14, 2022, we completed our offering and sale of $2,700.0 aggregate principal amount of our senior notes, consisting of $1,000.0 principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600.0 principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600.0 principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”), and $500.0 principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the 2027 Notes, the “Senior Notes”).
On April 14, 2022, we completed our offering and sale of $2,700.0 aggregate principal amount of our senior notes, consisting of $1,000.0 principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600.0 principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600.0 principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”), and $500.0 principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and together with the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, and 2028 Notes, the "Senior Notes").
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.
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.
We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2020 and state income tax returns for periods prior to the fiscal year ended March 31, 2019.
We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2021 and state income tax returns for periods prior to the fiscal year ended March 31, 2020.
As of March 31, 2023, we had repurchased a total of 11.7 shares of our common stock under the program, and 10.0 shares of our common stock remained available for repurchase under the share repurchase program.
As of March 31, 2024, we had repurchased a total of 11.7 shares of our common stock under the program, and 10.0 shares of our common stock remained available for repurchase under the share repurchase program.
We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2023 and 2022.
We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2024, and 2023.
Generally, we have been able to collect our accounts receivable in the ordinary course of business. 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.
Generally, we have been able to collect our accounts receivable in the ordinary course of business. We do not hold any collateral to secure payment from customers. We have trade credit insurance on the majority of our customers to mitigate accounts receivable risk.
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.
Credit Agreement 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.
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.
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.
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 43 years ended March 31, 2023, 2022, and 2021, respectively.
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 79.8%, 79.6% and 79.0% of net revenue during the fiscal years ended March 31, 2024, 2023 and 2022, respectively.
For the comparison of fiscal year 2022 to fiscal year 2021, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended March 31, 2022.
For the comparison of fiscal year 2023 to fiscal year 2022, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the year ended March 31, 2023.
For the fiscal years ended March 31, 2023, 2022 and 2021, 37.2%, 40.1% and 40.2%, respectively, of our net revenue was earned outside the United States.
For the fiscal years ended March 31, 2024, 2023, and 2022, 38.7%, 37.2%, and 40.1%, respectively, of our net revenue was earned outside the United States.
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.
As of March 31, 2023, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was $329.7. 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.
As of March 31, 2024, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was $629.6. These balances are dispersed across various locations around the world. We believe that such dispersion meets the 47 business and liquidity needs of our foreign affiliates.
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 $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.
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.
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.
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.
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.
General and administrative expenses for the fiscal years ended March 31, 2023 and 2022 include occupancy expense (primarily rent, utilities and office expenses) of $66.8 and $37.2, respectively, related to our development studios.
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.
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.
Provision for income taxes 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.
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.
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 .
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 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 ).
Our changes in cash flows were as follows: Fiscal Year Ended March 31, (millions of dollars) 2023 2022 2021 Net cash provided by operating activities $ 1.1 $ 258.0 $ 912.3 Net cash (used in) provided by investing activities (2,876.3) 139.2 (806.8) Net cash provided by (used in) financing activities 1,930.3 (256.8) (57.4) Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash and cash equivalents (15.9) (5.2) 18.6 Net change in cash, cash equivalents, and restricted cash and cash equivalents $ (960.8) $ 135.2 $ 66.8 At March 31, 2023, we had $1,234.6 of Cash, cash equivalents, and restricted cash and cash equivalents, compared to $2,195.4 at March 31, 2022.
Our changes in cash flows were as follows: Fiscal Year Ended March 31, 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 (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) Net change in cash, cash equivalents, and restricted cash and cash equivalents $ (132.6) $ (960.8) $ 135.2 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.
Gross profit as a percentage of net revenue for the fiscal year ended March 31, 2023 was 42.7%, as compared to 56.2% in the prior year.
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.
Net revenue from full game and other decreased by $64.1 and accounted for 21.9% of net revenue for the fiscal year ended March 31, 2023, as compared to 35.2% for the prior year.
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.
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.
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.
As of March 31, 2023, there were no borrowings under the 2022 Credit Agreement, and we had approximately $499.5 available for additional borrowings.
As of March 31, 2024, there were no borrowings under the 2022 Credit Agreement, and we had approximately $497.7 available for additional borrowings.
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. Hardware Platforms.
The economic environment has affected our customers in the past and may do so in the future. 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.
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.
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.
Fiscal 2023 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.
Fiscal 2024 Financial Summary 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.
Net revenue from digital online channels increased by $1,936.7 and accounted for 95.1% of our total net revenue for the fiscal year ended March 31, 2023, as compared to 89.8% in the prior year.
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 timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis. 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.
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, inflation, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates.
Net revenue from PC and other decreased by $65.0 and accounted for 9.5% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 16.3% in the prior year.
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.
Net revenue from console games decreased by $225.1 and accounted for 43.1% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 72.2% in the prior year.
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.
Fluctuations in Quarterly Operating Results and Seasonality We have experienced fluctuations in quarterly and annual operating results as a result of the timing of the introduction of new titles, variations in sales of titles developed for particular platforms, market acceptance of our titles, development and promotional expenses relating to the introduction of new titles, sequels or enhancements of existing titles, projected and actual changes in platforms, the timing and success of title introductions by our competitors, product returns, changes in pricing policies by us and our competitors, the accuracy of retailers' forecasts of consumer demand, the size and timing of acquisitions, the timing of orders from major customers, and order cancellations and delays in product shipment.
We are subject to risks inherent in foreign trade, including increased credit risks, tariffs and duties, fluctuations in foreign currency exchange rates, shipping delays and international political, regulatory and economic developments, all of which can have a significant effect on our operating results. 48 Fluctuations in Quarterly Operating Results and Seasonality We have experienced fluctuations in quarterly and annual operating results as a result of the timing of the introduction of new titles, variations in sales of titles developed for particular platforms, market acceptance of our titles, development and promotional expenses relating to the introduction of new titles, sequels or enhancements of existing titles, projected and actual changes in platforms, the timing and success of title introductions by our competitors, product returns, changes in pricing policies by us and our competitors, the accuracy of retailers' forecasts of consumer demand, the size and timing of acquisitions, the timing of orders from major customers, and order cancellations and delays in product shipment.
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.
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 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.
Net Bookings were as follows: Fiscal Year Ended March 31, 2023 2022 Increase/(decrease) Increase/(decrease) % Net Bookings $ 5,283.6 $ 3,408.2 $ 1,875.4 55.0 % For the fiscal year ended March 31, 2023, Net Bookings increased by $1,875.4 as compared to the prior year.
Net Bookings were as follows: Fiscal Year Ended March 31, 2024 2023 Increase/(decrease) Increase/(decrease) % Net Bookings $ 5,333.0 $ 5,283.6 $ 49.4 0.9 % For the fiscal year ended March 31, 2024, Net Bookings increased by $49.4 as compared to the prior year.
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 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.
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 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.
See Note 12 - (Loss) Earnings P er 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.
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) tax payments, and (vi) acquisitions.
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 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.
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 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.
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 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.
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.
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.
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.
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.
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 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.
As of March 31, 2023, we had gross unrecognized tax benefits, including interest and penalties, of $294.8, of which $137.2 would affect our effective tax rate if realized. For the fiscal year ended March 31, 2023, gross unrecognized tax benefits increased by $118.8.
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, 2024, gross unrecognized tax benefits decreased by $18.5.
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 .
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.
Interest and other, net (millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease) Interest income $ 33.8 0.6 % $ 17.6 0.5 % $ 16.2 92.0 % Interest expense (129.6) (2.4) % (18.6) (0.5) % (111.0) 596.8 % Foreign currency exchange gain (loss) (31.8) (0.6) % (7.3) (0.2) % (24.5) 335.6 % Other (14.3) (0.3) % (5.9) (0.2) % (8.4) 142.4 % Interest and other, net $ (141.9) (2.7) % $ (14.2) (0.4) % $ (127.7) 899.3 % Interest and other, net was expense of $141.9 for the fiscal year ended March 31, 2023, as compared to $14.2 for the fiscal year ended March 31, 2022.
Interest and other, net 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 % Interest expense (140.6) (2.6) % (129.6) (2.4) % (11.0) 8.5 % Foreign currency exchange gain (loss) (28.6) (0.5) % (31.8) (0.6) % 3.2 (10.1) % Other 3.3 0.1 % (14.3) (0.3) % 17.6 (123.1) % Interest and other, net $ (103.6) (1.9) % $ (141.9) (2.7) % $ 38.3 (27.0) % 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.
Our financial results are affected by the timing of our product releases and the commercial success of those titles. Our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 14.6% of our net revenue for the fiscal year ended March 31, 2023.
Our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 14.7% of our net revenue for the fiscal year ended March 31, 2024. The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis.
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.
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.
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.
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.
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.
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.
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.
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).
It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income. We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.
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.
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 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.
These increases were partially offset by a decrease in net revenue from our Grand Theft Auto , Borderlands and Red Dead Redemption franchises . Net revenue from physical retail and other channels decreased by $91.6 and accounted for 4.9% of our total net revenue for the fiscal year ended March 31, 2023, as compared to 10.2% for the prior year.
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 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!.
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.
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.
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 .
This increase was partially offset by a decrease in Net Bookings from our Grand Theft Auto and Borderlands franchises. 37 Results of Operations In this section, we discuss the results of our operations for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022.
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. 40 Results of Operations In this section, we discuss the results of our operations for the fiscal year ended March 31, 2024 compared to the fiscal year ended March 31, 2023.
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.
Principally for our mobile titles, we use advertising and other forms of player acquisition and retention to grow and retain our player audience. 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.
Further, events beyond our control may impact the availability of these new consoles, which may also affect demand. We manage our product delivery on each current and future platform in a manner we believe to be most effective to maximize our revenue opportunities and achieve the desired return on our investments in product development.
We manage our product delivery on each current and future platform in a manner we believe to be most effective to maximize our revenue opportunities and achieve the desired return on our investments in product development. Accordingly, our strategy for these platforms is to focus our development efforts on a select number of the highest quality titles.
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.
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.
Net revenue from recurrent consumer spending increased by $1,909.2 and accounted for 78.1% of net revenue for the fiscal year ended March 31, 2023, as compared to 64.8% for the prior year.
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 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 .
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; The Quarry; 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.
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. 39 Operating Expenses (millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease) Selling and marketing $ 1,592.6 29.8 % $ 516.4 14.7 % $ 1,076.2 208.4 % Research and development 892.5 16.7 % 406.6 11.6 % 485.9 119.5 % General and administrative 843.1 15.8 % 511.7 14.6 % 331.4 64.8 % Depreciation and amortization 122.3 2.3 % 61.1 1.7 % 61.2 100.2 % Total operating expenses $ 3,450.5 64.5 % $ 1,495.8 42.7 % $ 1,954.7 130.7 % Includes stock-based compensation expense, which was allocated as follows (in millions): 2023 2022 Selling and marketing $ 95.2 $ 30.0 Research and development 116.6 38.1 General and administrative 115.5 66.5 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.
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. 42 Operating Expenses 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) % Research and development 948.2 17.7 % 887.6 16.6 % 60.6 6.8 % General and administrative 716.1 13.4 % 839.5 15.7 % (123.4) (14.7) % 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: 2024 2023 Selling and marketing $ 95.3 $ 95.2 Research and development 104.4 116.6 General and administrative 111.5 115.5 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.
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.
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.
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 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.
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 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.
The proceeds from the issuance of the Senior Notes were used to finance a portion of our acquisition of Zynga.
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.
The TRAF allows the cantons to establish transition rules, the implementation of which may be subject to a ruling from the canton.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeChanges in market rates may affect our future interest expense if there is an outstanding balance on our line of credit. At March 31, 2023, there were no outstanding borrowings under our 2022 Credit Agreement. Foreign Currency Exchange Rate Risk We transact business in foreign currencies and are exposed to risks resulting from fluctuations in foreign currency exchange rates.
Biggest changeAt March 31, 2024, there were no outstanding borrowings under our 2022 Credit Agreement. Foreign Currency Exchange Rate Risk We transact business in foreign currencies and are exposed to risks resulting from fluctuations in foreign currency exchange rates. In particular, during the six months ended September 30, 2023, there was a significant devaluation of the Turkish Lira against the U.S.
These transactions are not designated as hedging instruments and are accounted for as derivatives whereby the fair value of the contracts is reported as either assets or liabilities on our Consolidated Balance Sheets, and gains and losses resulting from changes in the fair value are reported in Interest and other, net, in our Consolidated Statements of Operations.
These transactions are not designated as hedging instruments and are accounted for as derivatives whereby the fair value of the contracts is reported as either assets or 49 liabilities on our Consolidated Balance Sheets, and gains and losses resulting from changes in the fair value are reported in Interest and other, net, in our Consolidated Statements of Operations.
For the fiscal years ended March 31, 2023, 2022 and 2021, we recorded a loss of $15.1, a gain of $5.9, and a loss of $3.6, respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.
For the fiscal years ended March 31, 2024, 2023 and 2022, we recorded a gain of $5.3, a loss of $15.1, and a gain of $5.9, respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.
The available-for-sale securities were recorded at fair market value with unrealized gains or losses resulting from changes in fair value reported as a separate component of Accumulated other comprehensive (loss) income, net of tax, in Stockholders' equity. We also had $827.4 of cash and cash equivalents that are comprised primarily of money market funds and bank-time deposits.
The available-for-sale securities were recorded at fair market value with unrealized gains or losses resulting from changes in fair value reported as a separate component of Accumulated other comprehensive loss (income), in Stockholders' equity. We also had $754.0 of cash and cash equivalents that are comprised primarily of money market funds and bank-time deposits.
For the fiscal year ended March 31, 2023, 37.2% of our revenue was generated outside the United States. Using sensitivity analysis, a hypothetical 10% increase in the value of the U.S. dollar against all currencies would decrease revenue by 3.7%, while a hypothetical 10% decrease in the value of the U.S. dollar against all currencies would increase revenue by 3.7%.
For the fiscal year ended March 31, 2024, 38.7% of our revenue was generated outside the United States. Using sensitivity analysis, a hypothetical 10% increase in the value of the U.S. dollar against all currencies would decrease revenue by 3.9%, while a hypothetical 10% decrease in the value of the U.S. dollar against all currencies would increase revenue by 3.9%.
We do not currently use derivative financial instruments in our short-term investment portfolio. Our investments are held for purposes other than trading. As of March 31, 2023, we had $187.0 of short-term investments, which included $145.2 of available-for-sale securities.
We do not currently use derivative financial instruments in our short-term investment portfolio. Our investments are held for purposes other than trading. As of March 31, 2024, we had $22.0 of short-term investments, which included $0.0 of available-for-sale securities.
We do not enter into derivative financial contracts for speculative or trading purposes. At March 31, 2023, we had $51.2 of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $224.3 of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
We do not enter into derivative financial contracts for speculative or trading purposes. At March 31, 2024, we had $72.2 of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $243.0 of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
For the fiscal years ended March 31, 2023 and 2022, our foreign currency translation adjustment was a loss of $58.9 and a loss of $43.6, respectively.
For the fiscal years ended March 31, 2024 and 2023, our foreign currency translation adjustment was a gain of $6.7 and a loss of $58.9, respectively.
We recognized a foreign currency exchange transaction loss of $31.8, a loss of $7.3, and a gain of $0.7 for the fiscal years ended March 31, 2023, 2022, and 2021, respectively, in Interest and other, net in our Consolidated Statements of Operations.
We recognized foreign currency exchange transaction losses of $28.6, $31.8, and $7.3 for the fiscal years ended March 31, 2024, 2023, and 2022, respectively, in Interest and other, net in our Consolidated Statements of Operations.
At March 31, 2022, we had $75.8 of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $132.8 of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
At March 31, 2023, we had $51.2 of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $224.3 of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
Accounts relating to foreign operations are translated into U.S. dollars using prevailing exchange rates at the relevant period end. Translation adjustments are included as a separate component of stockholders' equity on our Consolidated Balance Sheets.
Dollar, which negatively affected our results. It is possible that further devaluations could occur, which would have a negative impact on our results. Accounts relating to foreign operations are translated into U.S. dollars using prevailing exchange rates at the relevant period end. Translation adjustments are included as a separate component of Stockholders' equity on our Consolidated Balance Sheets.
We determined that, based on the composition of our investment portfolio, there was no material interest rate risk exposure to our Consolidated Financial Statements or liquidity as of March 31, 2023.
We determined that, based on the composition of our investment portfolio, there was no material interest rate risk exposure to our Consolidated Financial Statements or liquidity as of March 31, 2024. Historically, fluctuations in interest rates have not had a significant effect on our operating results.
Historically, fluctuations in interest rates have not had a significant effect on our operating results. 45 Under our 2022 Credit Agreement, loans will bear interest at our election of (a) 0.000% to 0.625% above a certain 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 are determined by the Company's credit rating.
Under our 2022 Credit Agreement, loans will bear interest at our election of (a) 0.000% to 0.625% above a certain 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 are determined by the Company's credit rating.
We believe that the counterparties to these foreign currency forward contracts are creditworthy multinational commercial banks and that the risk of counterparty nonperformance is not material.
Our hedging programs are designed to reduce, but do not entirely eliminate, the effect of currency exchange rate movements. We believe that the counterparties to these foreign currency forward contracts are creditworthy multinational commercial banks and that the risk of counterparty nonperformance is not material.
As of March 31, 2023 and 2022, the fair value of these outstanding forward contracts was a gain of $2.5 and a gain of $0.2, respectively, and is included in accrued and other current liabilities.
As of March 31, 2024 and 2023, the fair values of these outstanding forward contracts were immaterial and were included in Accrued expenses and other current liabilities. The fair value of these outstanding forward contracts is estimated based on the prevailing exchange rates of the various hedged currencies as of the end of the period.
Removed
The fair value of these outstanding forward contracts is estimated based on the prevailing exchange rates of the various hedged currencies as of the end of the period. Our hedging programs are designed to reduce, but do not entirely eliminate, the effect of currency exchange rate movements.

Other TTWO 10-K year-over-year comparisons